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Shares of UnitedHealth Group (NYSE: UNH) surged in the wake of the Q4 results and 2023 guidance, but the bottom may not be in. The results were better than expected, but the outperformance was slim, and the guidance was mixed. The takeaway for investors is that a bottom may be in, but there is a risk the stock could fall to a new low as well.

But that’s the near-term story. The long-term story is that UnitedHealth Group continues to grow and penetrate its markets with more depth which is a double tailwind for the stock. This can be seen in the charts, which show downward pressure within a strong uptrend. This means that UnitedHealth Group is a Hold and will become a buy once the bottom has been confirmed.

UnitedHealth Group Outperforms In Q4

UnitedHealth Group outperformed in Q4, but that is a leading statement. The company posted $82.8 billion in net revenue for a gain of 12.3% versus last year, and it beat the consensus by 32 basis points or about 0.3%. The strength is good to see and should help support price action, but it is not a catalyst for rallying.

Within that, both segments saw double-digit growth, with UnitedHealth leading the way. There was a slight increase in medical care costs on an earnings basis, but efficiency improvements offset that. The operating margin improved by 90 basis points and the net margin by 30 to drive outperformance on the bottom line. The caveat is that bottom-line strength is as slim as the top-line and the guidance is mixed.

Earnings of $5.34 are up 17% from last year, which is good news. The bad news is that this also isn’t a strong catalyst for rallying and may not lead to higher prices right away. As for the guidance, the company reaffirmed its guidance last fall, which is mixed in relation to the Marketbeat.com consensus estimates.

The revenue is expected to come above consensus, but the earnings are forecast to come below. In this light, the company may outperform again, but it will have to do so in a much stronger fashion to impress the market.

The Analysts Are Buying UnitedHealth Group

The post-release analysts’ activity has been light so far, but there are 2 takeaways from the data. The 1st is the analysts have the stock pegged at a Moderate Buy, which has held steady for more than a year. The 2nd is the price target. The price target is more than 22.0% above the post-release price action, which is trending higher.

The last major report on the Marketbeat.com analyst tracking page came out in early December from Credit Suisse. They have the stock rated at Outperform and upped their target to above the current consensus figure.

They came out and reiterated that position in the wake of the Q4 results and listed the stock as one of their HOLT ideas for 2023. HOLT stocks are Outperform-rated stocks with the least demanding market expectations.

The Technical Outlook: UnitedHealth Group Could Be At Bottom

The price action in UnitedHealth Group certainly heated up following the Q4 release. The stock popped and showed signs of bottoming, but the late-day action confirms resistance is still present. This could lead to additional volatility if not some actual downside, in the near term, but it does look like the stock could be near a turning point.

The long-term trend is upward, and price action is below the 150-day EMA and at a point where reversals have occurred in the past. Assuming the market repeats, this stock should begin bottoming this week or soon after. If not, this market may have entered a consolidation range that could keep it moving sideways until later in the year.

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Article by Thomas Hughes, MarketBeat

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