UnitedHealth Jumps Despite the Dow's Decline

Stocks have hit a snag after four days of gains, with the Dow Jones Industrial Average (DJINDICES: ^DJI  ) dropping 20 points into the red as of 2:30 p.m. EDT. Blue-chip stocks were stocks evenly split between risers and losers so far. The market's largest health insurer, UnitedHealth Group (NYSE: UNH  ) , has been the Dow's big winner today as shares have jumped 1.9%. Meanwhile, shares of drugstore giant Rite-Aid (NYSE: RAD  )  slipped 4.2% after the company reported quarterly earnings. Let's catch up on what you need to know.

Can UnitedHealth outperform its peers?
UnitedHealth has size on its side in an industry where more subscribers is better, but that hasn't helped this insurance giant beat its peers on the market in 2014. In fact, UnitedHealth's stock has trailed some of its biggest competitors over the past year.

UNH Chart

UNH data by YCharts.

The company has played it safe on getting involved with Obamacare, though UnitedHealth has capitalized in a big way on Medicaid reform. Expansion of this program has helped many insurers, and UnitedHealth managed a 10% gain in Medicaid subscriber growth in its most recent quarter, the largest year-over-year jump in any one of its markets. While cuts to Medicare Advantage have dampened the company's subscriber growth in that market, Medicaid expansion has helped UnitedHealth overcome falling subscription numbers in its commercial risk-based market so far in 2014.

As more customers accept Obamacare over the long term, expect UnitedHealth and other major players to capitalize on the inflow of new insurance subscribers. While that means more premium revenue, it also means UnitedHealth will need to keep a handle on medical costs. Younger adults signed up in greater rates toward the end of the six-month ACA launch window, and if that trend keeps up over time, it will help UnitedHealth and others balance out paying for older, sicker customers flocking to the health-insurance exchanges. Still, perhaps the best part of UnitedHealth's stock -- its 1.9% dividend, one of the best in the insurance industry -- looks like a safe bet for the long term. The company raised its dividend by 34% in early June, and this strong yield isn't in any danger of slowing down.

Source: Wikimedia Commons

Elsewhere in the world of health care, Rite-Aid said soaring drug costs walloped its earnings. Rite-Aid's first-quarter net profit tumbled by 54% even as revenue gained 2.7% and exceeded analyst projections. The company has done well in keeping same-store sales growth churning higher, with the mark gaining by more than 3% year over year for the quarter. While reimbursement rates and higher costs took a big bite out of the company's performance, Rite-Aid has maintained its projections for earnings in this fiscal year.

In the long run, the chain looks to be headed in the right direction: Sales growth looks strong, and Rite-Aid increased the number of prescriptions filled by 2.3% during the quarter. Given that sales of prescriptions make up more than two-thirds of the company's revenue, that's a big positive.

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