Healthcare ETFs In Focus On UnitedHealth's Solid Q4 Earnings

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The largest U.S. health insurer UnitedHealth Group (UNH - Free Report) reported better-than-expected fourth-quarter 2020 results wherein it breezed past the Zacks Consensus Estimate on both earnings and revenues. UnitedHealth also reiterated its upbeat full-year outlook.

Earnings per share came in at $2.52, well above the Zacks Consensus Estimate of $2.39 but below the year-ago earnings of $3.90. Revenues grew 7.8% year over year to $65.1 billion and edged past the estimated $65.07 billion. Strong results were led by Optum and by UnitedHealthcare’s community and senior benefit businesses, even with the expansive COVID-19 response supporting patients, care providers, customers and communities.

Medical ratio (a measure of the percentage of premiums paid out for medical services) declined to 79.1% from 82.5% a year ago. The health insurer reaffirmed its 2021 adjusted earnings per share in the range of $17.70-$18.25, including a $1.80 hit due to treatment and testing costs related to COVID-19. The Zacks Consensus Estimate for earnings per share is pegged at $18.22 for 2021.

Despite the solid results, UNH shares dropped 0.4% in yesterday’s trading session. The stock currently has a Zacks Rank #3 (Hold) and Value Score of B. It belongs to an unfavorable Zacks industry (placed at the bottom 21% of 250+ industries).

Investors could tap the company’s growth with ETFs having the largest allocation to this health insurance giant. We have highlighted them in detail below:

iShares U.S. Healthcare Providers ETF (IHF - Free Report)

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 57 securities in its basket and UNH occupies the top position with 21.7% share. The fund has amassed $1.2 billion in its asset base, while volume is light at about 29,000 shares per day, on average. It charges 42 bps in annual fees and has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.

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