UnitedHealth Setting A Very Positive Tone For 2017

Credit Suisse still rates UnitedHealth Group Inc UNH Outperform as it expects the company’s differentiated growth profile to continue in 2017.

UnitedHealth confirmed 2017 consensus EPS of $9.07, supporting mid-teens EPS growth. The company has several catalysts next year including the health insurance industry fee holiday and a sharp reduction in exchange losses.

“We believe the company's differentiated growth across both Optum and UnitedHealthcare will also play a key role in driving above-average growth for the company in 2017, and likely 2018 as well,” analyst Scott Fidel wrote in a note.

Fidel says Optum remains the key reason to own the shares, driven by expected strong momentum for OptumCare and Optum360 businesses. Meanwhile, the analyst expects medicare margins to be at the high-end of 3-5 percent in 2017.

For the third quarter, UnitedHealth reported cash EPS of $2.17, which was 4-5 percent above Street estimates of $2.08. Total revenue came in at $46.293 billion, +0.7 percent above Credit Suisse's estimate of $45.975 billion.

UnitedHealth raised 2016 cash EPS outlook to $8.00 versus prior estimate of $7.80-7.95. The analyst upped his 2016-2017 cash EPS estimates to $8.01/ $9.15.

“The stock remains our top pick given the lack of deal risk facing large cap MCO peers, excellent organic growth prospects and the exchange de-risking in 2017,” Fidel added.

Fidel raised his target price to $160 from $155.