UnitedHealth's Optum Defends Multi-Billion Dollar Amedisys Deal, Ensures Competitive Landscape

Wednesday, November 13, 2024

The Zacks Research Daily presents the best research output of our analyst team. Today's Research Daily features new research reports on 16 major stocks, including UnitedHealth Group Inc. (UNH), Bank of America Corp. (BAC) and SAP SE (SAP). These research reports have been hand-picked from roughly 70 reports published by our analyst team today.

You can see all of today’s research reports here >>>

UnitedHealth’s shares have outperformed the Zacks Medical - HMOs industry over the past two years (+19.7% vs. +12.8%). The Zacks analyst believes that strong market position, new deals, renewed agreements, expansion of service offerings, government business have aided the company.

However, membership in its global business continues to be a concern. High operating costs due to rising medical expenses are hurting margins.

(You can read the full research report on UnitedHealth here >>>)

Bank of America’s shares have underperformed the Zacks Financial – Investment Bank industry over the past year (+56.9% vs. +64.7%). The Zacks analyst believes that high funding costs, the challenging macroeconomic environment weighing on the investment banking business, and operating costs remaining high due to continued investments in franchise have ailed.

Yet, the company’s plans to open financial centers in new and existing markets and improve digital capabilities should support the top line.

(You can read the full research report on Bank of America here >>>)

Shares of SAP have outperformed the Zacks Computer - Software industry over the last six months (+23.6% vs. +9.0%). Per the Zacks analyst, amid a volatile macro environment, the company is making significant strides in Business AI initiatives, with innovations like SAP Knowledge Graph. Synergies from WalkMe’s acquisition and ongoing restructuring efforts also bode well. Cloud ERP Suite sales have also driven revenue.

However, softness in the Software license and support business segment remains a headwind.

(You can read the full research report on SAP here >>>)

Other noteworthy reports we are featuring today include Boston Scientific Corp. (BSX), Sanofi (SNY) and Sony Group Corp. (SONY).

Mark Vickery

Senior Editor

Note: Sheraz Mian heads the Zacks Equity Research department and is a well-regarded expert of aggregate earnings. He is frequently quoted in the print and electronic media and publishes the weekly Earnings Trends and Earnings Preview reports. If you want an email notification each time Sheraz publishes a new article, please click here>>>

Today's Must Read

Solid Top Line & Strong Cash Flows Drive UnitedHealth (UNH)

Branch Openings, Lower Rates Aid BofA (BAC), Fee Income Ails

Solid Demand in Cloud & AI Innovations Drive SAP's Prospects

Featured Reports

Dupixent to Remain Sanofi's (SNY) Key Top-Line Driver

The Zacks analyst expects Dupixent to remain Sanofi's key top-line driver as it enjoys strong demand trends. Sanofi has also accelerated its pipeline this year and has been active on the M&A front

Investments & Customer Additions Aid Southwest Gas (SWX)

Per the Zacks analyst, Southwest Gas' strategic investment plans will support system improvements and pipe replacement programs. Consistent customer additions will further boost its results.

Sunoco's (SUN) Robust Motor Fuel Distribution Network Aids

Per the Zacks analyst, Sunoco's long-term contracts with over 10,000 convenience stores across the U.S. should ensure stable earnings. However, its significant reliance on debt raises concerns.

Solid Non-Gaming Business Aid Wynn Resorts (WYNN) Prospects

Per the Zacks analyst, Wynn Resorts is likely to gain from solid non-gaming business and strategic capital investments. Also, focus on development projects like the event center bodes well.

Strength in Games & Network, Music Segments Benefits SONY

Per the Zacks analyst, Sony is gaining from strong performance of its Games & Network and Music segments. Weak macro conditions, lower hardware sales and rising costs are concerns.

Robust EP Gains Aid Boston Scientific (BSX), Cost Woes Worry

Per the Zacks analyst, the stellar performance of Boston Scientific's Electrophysiology (EP) business is led by FARAPULSE PFA system. Yet, rising expenses from macroeconomic headwinds raise concerns.

Solid Top Line Aids American Financial (AFG), Cat Loss Ails

Per the Zacks analyst, American Financial growing revenues driven by higher net investment income, net earned premiums have led to significant growth. However, exposure to cat loss is a concern.

New Upgrades

Strong SMB clientele Aids BILL Holdings (BILL) Prospects

Per the Zacks analyst, BILL is benefiting from an expanding small and medium business (SMB) clientele, as well as a diversified business model.

End-Market Strength & Diversification Aids Amphenol (APH)

Per the Zacks analyst, Amphenol is benefiting from commercial air, military, industrial and automotive end-market demand. Diversified business model also lowers volatility of individual geographies.

Acquisitions & Restructuring Initiatives Aid UBS Group (UBS)

Per the Zacks analyst, UBS Group's emphasis on business restructuring to strengthen its financials is promising, while opportunistic acquisitions are expected to drive long-term growth.

New Downgrades

Decreased Demand Paper Related Products Hurts Xerox (XRX)

Per the Zacks analyst, Xerox is grappling with decreased demand for paper-related systems and products. Rising competition is concerning.

Weak Demand, Low Steel Margins Ail Commercial Metals (CMC)

Per the Zacks analyst, sluggish demand in Europe is putting pressure on Commercial Metals' results. Lower steel product margins also remain worrisome.

Soft Demand to Hurt Capri Holdings (CPRI) Top Line

Per the Zacks analysts, softness in demand for luxury fashion items is likely to hurt Capri Holdings top line. The company is seeing sluggishness across its brands.

Zacks Investment Research

The U.S. Department of Justice (DOJ) recently filed a lawsuit to block UnitedHealth Group Incorporated’s UNH $3.3 billion acquisition of Amedisys, Inc. AMED, arguing that the merger would hurt competition in the home health and hospice care market.

According to the DOJ, merging UnitedHealth’s Optum unit, a major provider in this sector, with Amedisys could limit patient choices and reduce competitive pay for nurses. It is also expected to decrease options for insurers. This reduced competition might lead to higher costs and limited access to affordable home health care for seniors.

Per Bloomberg, attorneys general from four states — Maryland, Illinois, New Jersey, and New York — have joined the DOJ's complaint. Last year, UnitedHealth acquired LHC Group for $5.4 billion, another large home health provider, increasing its influence in this sector. The DOJ suggests that UnitedHealth’s acquisitions reflect a strategy of buying competitors rather than competing directly, potentially giving it control over multiple markets.

However, UnitedHealth’s Optum division expects that the acquisition would foster industry innovation and improve value-based care for patients. Optum has committed to “vigorously defend” the acquisition and proposed to sell some care centers to VitalCaring Group’s affiliate VCG Luna, a home health provider, to address competition concerns. But the DOJ considers these proposed divestitures insufficient to resolve the potential harm.

Optum's expertise in value-based care, combined with Amedisys' focus on home-based care and quality innovation, was anticipated to enhance health outcomes, lower costs, and improve patient care continuity. Over the years, Optum has made strategic acquisitions to strengthen its market position and expand its capabilities. This business segment plays a key role in UnitedHealth's broader diversification strategy.

UNH’s Price Performance

UnitedHealth shares have gained 13.2% in the past year compared with the industry’s 9.4% growth.