Healthy Q1 Earnings at UnitedHealth: ETFs to Watch

The largest U.S. health insurer UnitedHealth Group UNH reported robust first-quarter 2018 results. The company breezed past the Zacks Consensus Estimate on both the top and the bottom lines as well as raised its full-year outlook, sending its shares rallying. UNH gained 3.6% on Apr 17, after reporting earnings.

Earnings per share came in at $3.04, well above the Zacks Consensus Estimate of $2.92 and 28.3% higher than the year-ago earnings. Revenues rose 13.3% year over year to $55.2 billion, edging past the Zacks Consensus Estimate of $54.9 billion.

For 2018, the company raised its outlook. UnitedHealth now projects adjusted earnings per share in the range of $11.70-$11.95 compared with the previous forecast of $11.65-$11.95. This suggests a solid outlook for the company’s growth.

Further, the stock currently has a Zacks Rank #3 (Hold) and a solid industry Rank in the top 9%. It has a VGM (Value, Growth, Momentum) score of B, underscoring its potential to outperform in the weeks ahead.  

Given the strong fundamentals, investors should tap the opportunity with ETFs having the largest allocation to this health insurer giant. For them, we have presented four ETFs that could see potential upside in the days ahead (see all Health Care ETFs here).

iShares U.S. Healthcare Providers ETF IHF

This ETF follows the Dow Jones U.S. Select Healthcare Providers Index with exposure to companies that provide health insurance, diagnostics and specialized treatment. In total, the fund holds 46 securities in its basket and UNH occupies the top position with 14.2% share. The fund has amassed $488.0 million in its asset base. It charges 44 bps in annual fees and has a Zacks ETF Rank #1 (Strong Buy with a Medium risk outlook (read: 4 ETFs to Gain From CVS-Aetna Deal).

Health Care Select Sector SPDR Fund XLV

The most popular healthcare ETF, XLV follows the Health Care Select Sector Index. This fund manages nearly $15.4 billion in its asset base. Expense ratio comes in at 0.13%. In total, the fund holds 61 securities in its basket with UNH taking the second spot at 7.1% of the assets. Pharma accounts for 33% share from a sector look while healthcare equipment & supplies, and health care providers & services make up for a double-digit exposure each. It has a Zacks ETF Rank #3 with a Medium risk outlook (read: Cigna to Buy Express Scripts: Healthcare ETFs in Focus).

iShares U.S. Healthcare ETF IYH

This fund offers exposure to 119 securities by tracking the Dow Jones U.S. Health Care Index. Here again, UnitedHealth is the second firm accounting for 6.7% of total assets. In terms of industrial exposure, pharma takes the top spot at 31.9%, followed by biotech (20.5%), and healthcare equipment (20%). The product has amassed nearly $2 billion in its asset base while charges 44 bps in annual fees. It has a Zacks ETF Rank #3 with a Medium risk outlook.

SPDR Dow Jones Industrial Average ETF DIA

This fund follows the Dow Jones Industrial Average, providing exposure to 30 blue-chip U.S. stocks. UNH occupies the third position in the basket with 6.45% share. The ETF is well spread out across a number of sectors with industrials, information technology, financials, consumer discretionary and health care taking the top five spots with a double-digit exposure each. DIA is one of the largest and most-popular ETFs in the space with AUM of $21.4 billion. It charges 17 bps in annual fees from investors and has a Zacks ETF Rank #1 (Strong Buy).

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SPDR-DJ IND AVG (DIA): ETF Research Reports
 
SPDR-HLTH CR (XLV): ETF Research Reports
 
ISHARS-US HLTHC (IYH): ETF Research Reports
 
ISHARS-US H C P (IHF): ETF Research Reports
 
UnitedHealth Group Incorporated (UNH) : Free Stock Analysis Report
 
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