Will Obamacare Sink Tomorrow’s UnitedHealth Group Inc. (UNH) Earnings?

UnitedHealth Group IncUnitedHealth Group Inc. (NYSE:UNH) is scheduled to release its quarterly earnings report tomorrow, and the company is at the epicenter of the debate over health care reform and the gradual implementation of Obamacare. But with the stock trading near all-time highs, will UnitedHealth be able to overcome the impediments that Obamacare has put in its path and produce the earnings growth investors want to see?

As the newest member of the Dow Jones Industrial Average (Dow Jones Indices:.DJI), UnitedHealth Group Inc. (NYSE:UNH) is a giant in the health care industry. The prospect of bringing millions of previously uninsured Americans onto its insurance rolls has helped push UnitedHealth stock to all-time highs recently, but analysts are less certain that UnitedHealth’s earnings will grow as quickly. Let’s take an early look at what’s been happening with UnitedHealth Group Inc. (NYSE:UNH) over the past quarter and what we’re likely to see in its quarterly report.

Stats on UnitedHealth

Analyst EPS Estimate $1.25
Change From Year-Ago EPS (1.6%)
Revenue Estimate $30.5 billion
Change From Year-Ago Revenue 11.9%
Earnings Beats in Past 4 Quarters 3

Source: Yahoo! Finance.

Where will growth in UnitedHealth earnings come from?
UnitedHealth Group Inc. (NYSE:UNH)’s earnings prospects have gotten drearier in the eyes of analysts in recent months: Estimates for the June quarter have come down by a nickel per share, and estimates for the 2013 and 2014 years have been lowered even more. The stock, though, has put in some decent gains, rising about 7% since mid-April.

Already, investors have prepared for what they see as an inevitable slowdown in UnitedHealth’s earnings growth. Even as earnings have grown about 15% annually over the past five years, UnitedHealth Group Inc. (NYSE:UNH) sees that growth rate falling into the single digits this year and next. Yet while the stock’s earnings multiple of about 13 doesn’t look ridiculously overpriced, UnitedHealth’s valuation is far greater than the single-digit P/Es that Humana Inc (NYSE:HUM) and WellPoint, Inc. (NYSE:WLP) sport, despite all three companies’ sharing the same opportunity to pick up millions of new customers once Obamacare fully takes effect. Moreover, with doubts arising about whether state-run health exchanges will be lucrative enough to justify participating in, it’s far from clear whether UnitedHealth Group Inc. (NYSE:UNH), Humana Inc (NYSE:HUM), WellPoint, Inc. (NYSE:WLP), and other insurers will choose to offer insurance in many jurisdictions.