Dow’s 4th-Largest Stock Surges on Earnings Surprise

Dow’s 4th-Largest Stock Surges on Earnings Surprise

Shares of UnitedHealth Group Inc (NYSE: UNH), the Dow’s fourth most heavily weighted component, shot up after the healthcare giant beat Wall Street’s current growth estimates.

On Tuesday, the stock rose from Monday’s closing price of $222.07 to $239.84, a jump of 8%. The Dow 30 member has since pared some of the gains to trade at $238.20.

UnitedHealth (NYSE:UNH), the Dow’s fourth most heavily weighted component, surged on Tuesday. | Source: Yahoo Finance

The Minnetonka, Minnesota-based health giant disclosed in its third-quarter results that its 2019 earnings growth would come in between 13% and 16%. This was against Wall Street estimates of 11%.

UnitedHealth to grow by ‘conservative’ double digits

Full-year adjusted earnings forecasts are now expected to range between $14.90 and $15 per share. Previously, earnings had been estimated to come in between $14.70 and $14.90.

Despite beating estimates, CEO David Wichmann still called the projections “conservative.”

For the third quarter, UnitedHealth also posted numbers that beat Wall Street revenue projections. Revenues grew by 6.7% year-on-year or by $3.8 billion to reach $60.4 billion.

This was the third consecutive quarter that the healthcare giant exceeded analyst expectations. And despite heading into the 2020 election with a stable of Democratic presidential candidates whose agendas could upend the private healthcare market, Wichmann gave assurances that UnitedHealth had the capacity to weather difficult operating environments.

“We have a strong track record of thriving in fluid environments, similar to the one we find ourselves in today,” Wichmann said. “We are uniquely diverse with significant experience and weight in every aspect of health care.”

Perhaps in an effort to preempt a radical shift in the US healthcare delivery system, the CEO of the company’s UnitedHealthcare division, Dirk McMahon, argued that increased access would be driven by lowering costs.

UnitedHealth hopes that lower costs will lead to increased access. | Source: Twitter

In April, Wichmann warned that plans by Democrats to provide socialized medicine would “destabilize the nation’s health system.”

Dow boosted by analyst-beating UNH earnings

Despite the optimism, UnitedHealth Group stock still trades well below its all-time high, and it’s also currently nearly 12% below the 2019 high it set in July.

UnitedHealth’s rally helped boost the Dow Jones Industrial Average (INDEXDJX:.DJI). | Source: Yahoo Finance

Nevertheless, UnitedHealth’s stellar earnings and projections helped launch the Dow Jones Industrial Average to gains of around 300 points.

Other stocks that contributed to the upside alongside UnitedHealth include JPMorgan Chase, which rose by around 4%. Intel, Caterpillar, and Johnson & Johnson also boosted the index.

This article was edited by Josiah Wilmoth.

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