UnitedHealth Group (NYSE:UNH), the largest U.S. health insurer, reported better-than-expected second-quarter 2024 results as it breezed past the Zacks Consensus Estimate on both earnings and revenues. UNH shares climbed 6.5% on the day following the results.
Investors can tap the opportunity by investing in ETFs having the largest allocation to this health insurance giant. These include iShares U.S. Healthcare Providers ETF (NYSE:IHF), Health Care Select Sector SPDR Fund (NYSE:XLV), iShares U.S. Healthcare ETF (NYSE:IYH), Fidelity MSCI Health Care Index ETF (NYSE:FHLC) and SPDR Dow Jones Industrial Average ETF.
Earnings in Focus
Earnings per share came in at $6.80, topping the Zacks Consensus Estimate of $6.65 and increasing 10.7% from the year-ago quarter. Revenues grew 6.4% year over year to $98.9 billion and were above the estimated $98.7 billion. The solid results were powered by strong growth in Optum health care unit.
Optum revenues increased 11.7% to $62.9 billion, driven by the higher number of patients at Optum Health and the increased number of customers using the Optum Rx pharmacy service. UnitedHealthcare revenues rose 5.3% year over year to $73.9 billion, reflecting growth in the number of people served domestically.
Medical ratio (a measure of the percentage of premiums paid out for medical services) deteriorated 190 basis points year over year to 85.1% but came in higher than the Zacks Consensus Estimate of 84.4%.
The health insurer affirmed its 2024 earnings per share guidance in the range of $27.50-$28.00, indicating 10.5% year-over-year growth at the mid-point. Notably, UnitedHealth is among the largest players in the Medicare Advantage market, where private insurers offer an alternative to the original Medicare — the federal government’s health insurance plan for people aged 65 and older or those with certain disabilities.
ETFs in Focus
Let’s delve into each ETF below:
iShares U.S. Healthcare Providers ETF
iShares U.S. Healthcare Providers ETF follows the Dow Jones U.S. Select Healthcare Providers Index with exposure to companies that provide health insurance, diagnostics and specialized treatment. The fund holds 66 securities in its basket. UNH occupies the top position with a 23.8% share.
iShares U.S. Healthcare Providers ETF has amassed $752.3 million in its asset base, while volume is light at about 76,000 shares per day, on average. It charges 40 bps in annual fees and has a Zacks ETF Rank #1 (Strong Buy) with a Medium risk outlook.
Health Care Select Sector SPDR Fund
Health Care Select Sector SPDR Fund is the most popular healthcare ETF and follows the Health Care Select Sector Index. It holds 63 securities in its basket, with UnitedHealth taking the second spot at 9.1% of the assets. Pharma, healthcare providers & services, and healthcare equipment & supplies take the largest share at 32.5%, 21.2% and 19.7%, respectively, from a sector look.
Health Care Select Sector SPDR Fund has AUM of $40.3 billion in its asset base and trades in a heavy volume of around 6 million shares. The expense ratio comes in at 0.09%. XLV has a Zacks ETF Rank #1 (Strong Buy) with a Medium risk outlook.
iShares U.S. Healthcare ETF
iShares U.S. Healthcare ETF offers exposure to 107 U.S. healthcare equipment and services, pharmaceuticals, and biotechnology companies by tracking the Russell 1000 Health Care RIC 22.5/45 Capped Gross Index. Here again, UnitedHealth is the second firm, accounting for 8.8% of the total assets. In terms of industrial exposure, pharma takes the top spot at 32.9%, followed by healthcare equipment (18.9%) and biotech (18.2%).
iShares U.S. Healthcare ETF has amassed $3.3 billion in its asset base while charging 40 bps in annual fees. It trades in a good volume of around 205,000 shares a day and has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.
Fidelity MSCI Health Care Index ETF
Fidelity MSCI Health Care Index ETF provides exposure to 369 healthcare stocks and tracks the MSCI USA IMI Health Care Index. UnitedHealth occupies the second position with 7.6% of the assets. Pharma accounts for 29.5% share while healthcare providers and services, healthcare equipment and supplies, and biotech round off the top three spots with double-digit exposure each.
Fidelity MSCI Health Care Index ETF has AUM of $3 billion. Its expense ratio is 0.08%, while volume is good at 119,000 shares a day. FHLC has a Zacks ETF Rank #3 with a Medium risk outlook.
SPDR Dow Jones Industrial Average ETF
SPDR Dow Jones Industrial Average ETF is one of the largest and most popular ETFs in the large-cap space, with AUM of $34.3 billion and an average daily volume of 3 million shares. It tracks the Dow Jones Industrial Average Index, holding 30 stocks in its basket. UNH occupies the top position, accounting for an 8.8% share. Financials (23.3%), information technology (19.4%), healthcare (18.6%), consumer discretionary (14.3%) and industrials (13.9%) are the top five sectors.
SPDR Dow Jones Industrial Average ETF charges 16 bps in annual fees and has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook.
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