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ETFs to Buy on UnitedHealth’s Q2 Earnings Beat

The largest US health insurer UnitedHealth Group UNH reported better-than-expected second-quarter 2022 results, breezing past the Zacks Consensus Estimate for both earnings and revenues. The company lifted its full-year earnings guidance for the second straight quarter.

Following the robust results, UNH shares climbed more than 5% on the day. Investors could tap the earnings strength with ETFs having the largest allocation to this health insurance giant, such as iShares US Healthcare Providers ETF IHF, iShares Evolved US Healthcare Staples ETF IEHS, Simplify Health Care ETF PINK, Health Care Select Sector SPDR Fund XLV and iShares US Healthcare ETF IYH.

Earnings in Focus

Earnings per share came in at $5.57, topping the Zacks Consensus Estimate of $5.24 and increasing 4.7% from the year-ago quarter. Revenues grew 13% year over year to $80.3 billion and edged past the estimated $79.6 billion. Solid results were driven by continued strong expansion in people served at UnitedHealthcare and in value-based arrangements at Optum Health (see: all the Healthcare ETFs here).

UnitedHealthcare added 55,000 Medicare Advantage members and 180,000 Medicaid members during the quarter, while commercial membership grew 80,000. Medical ratio (a measure of the percentage of premiums paid out for medical services) dropped to 81.5% from 82.8% in the year-ago quarter.

The health insurer raised its adjusted earnings per share view for the full year to $21.40-$21.90 from $21.20-$21.70. The Zacks Consensus Estimate is pegged at $21.71 for earnings per share.

ETFs in Focus

Let’s delve into each ETF below:

iShares US Healthcare Providers ETF (IHF)

iShares US Healthcare Providers ETF follows the Dow Jones US Select Healthcare Providers Index with exposure to companies that provide health insurance, diagnostics and specialized treatment. In total, the fund holds 71 ‚Äč‚Äčsecurities in its basket, and UNH occupies the top position with a 23.1% share.

iShares US Healthcare Providers ETF has amassed $1.5 billion in its asset base, while volume is light at about 51,000 shares per day, on average. It charges 42 bps in annual fees and has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook (read: Yield Curve Inverts Most Since 2000: Defensive ETFs in Focus).

iShares Evolved US Healthcare Staples ETF (IEHS)

iShares Evolved US Healthcare Staples ETF is an actively managed ETF employing data science techniques to identify companies with exposure to the health-care staples sector. It holds 167 stocks in its basket, with UnitedHealth taking the top spot at 16%.

iShares Evolved US Healthcare Staples ETF has accumulated $36.3 million in its asset base and sees a meager volume of 6,000 shares. It charges 18 bps in annual fees.

Simplify Health Care ETF (PINK)

Simplify Health Care ETF seeks long-term capital appreciation by providing investors with multi-cap exposure to groundbreaking and innovative companies in biotech, medtech, gene therapy, and other fast-growing health-care-related sectors. It holds 55 stocks in its basket, with UnitedHealth occupying the top position at 10.7% of the portfolio.

Simplify Health Care ETF has accumulated $.34.5 million in its asset base and trades in an average daily volume of 32,000 shares. It charges 50 bps in annual fees.

Health Care Select Sector SPDR Fund (XLV)

Health Care Select Sector SPDR Fund is the most-popular health care ETF and follows the Health Care Select Sector Index. It holds 64 securities in its basket, with UnitedHealth taking the top spot at 9.8% of the assets. Pharma, healthcare providers & services, and health care equipment & supplies take the largest share at 31.8%, 22.9% and 18.1% share, respectively, from a sector look.

Health Care Select Sector SPDR Fund manages nearly $38 billion in its asset base and trades in a heavy volume of around 11.2 million shares. The expense ratio comes in at 0.10%. XLV has a Zacks ETF Rank #1 (Strong Buy) with a Medium risk outlook (read: 5 Sector ETFs That Show Promise After June Jobs Data).

iShares US Healthcare ETF (IYH)

iShares US Healthcare ETF offers exposure to 112 US 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 top firm accounting for 9.5% of the total assets. In terms of industrial exposure, pharma takes the top spot at 31.9%, followed by health care equipment (17.7%) and biotech (17.1%).

iShares US Healthcare ETF has amassed $3 billion in its asset base, while charging 41 bps in annual fees. It trades in a moderate volume of around 51,000 shares a day and has a Zacks ETF Rank #1 with a Medium risk outlook.

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UnitedHealth Group Incorporated (UNH): Free Stock Analysis Report

Health Care Select Sector SPDR ETF (XLV): ETF Research Reports

iShares US Healthcare ETF (IYH): ETF Research Reports

iShares US Healthcare Providers ETF (IHF): ETF Research Reports

iShares Evolved US Healthcare Staples ETF (IEHS): ETF Research Reports

Simplify Health Care ETF (PINK): ETF Research Reports

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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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