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UnitedHealth (UNH) Up 4.7% Since Last Earnings Report: Can It Continue?
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It has been about a month since the last earnings report for UnitedHealth Group (UNH - Free Report) . Shares have added about 4.7% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is UnitedHealth due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
UnitedHealth's Earnings in Q2 Beat on Lower Payouts
UnitedHealth Group Inc.’s second-quarter 2020 earnings of $7.12 per share surpassed the Zacks Consensus Estimate by 37.45%. This also compares favorably with earnings of $3.60 per share a year ago.
Better-than-expected earnings were driven lower by an unprecedented, temporary deferral of care in the company’s risk-based businesses, as hospital elective payouts were put on hold due to the coronavirus outbreak.
UnitedHealth’s revenues of $62.1 billion missed the Zacks Consensus Estimate by 2.7%. However, the top line improved 2.5% year over year, aided by broad-based revenue growth at Optum and UnitedHealthcare.
Medical care ratio of 70.2% improved 1290 basis points year over year, mainly owing to the temporary deferral of care amid the pandemic.
Operating cost ratio of 16.1% increased 220 basis points due to the health insurance tax, COVID-19 response efforts and business mix.
Total operating cost of $52.9 billion was down 5.3% year over year, mainly on account of lower medical costs.
Strong Segmental Performances
In the reported quarter, the company’s health benefits segment, UnitedHealthcare, generated revenues worth $49.1 billion, up 1% year over year. Revenue growth was attributable to strong Medicare Advantage and dual special needs plans, partly offset by a decline in commercial enrollment.
The company’s business groups, namely Medicare and Retirement plus Community and State contributed to growth, partly offset by lower contribution from Employer and individual and Global segments. Earnings from operations worth $7 billion were up from $2.6 billion last year, backed by the temporary impact of deferred care, net of COVID-19 treatment costs and the initial impact of a decelerating economy.
Revenues from another segment, Optum, improved 16.8% year over year to $32.7 billion, reflecting robust contributions from the sub-segments of OptumHealth (up 27.8%), OptumInsight (12.6%) and OptumRx (up 13%). Earnings from operations rose 6.3% year over year to $2.2 billion.
The segment gained from the company’s efforts in different areas, which included extending geographic presence and adding distinctive capabilities through strategic acquisitions in infusion services (Diplomat Pharmacy), post-acute care (NaviHealth) and digital behavioral health (AbleTo); launching the Boulder Community Health partnership; providing testing services in California, Indiana and Florida and introducing digital-at-home and rare-disease pharmacy programs.
Decline in Membership Enrollment
The company served 48.4 million people in the quarter, down 2.2% year over year, thanks to lower member enrollment in the Commercial and International business.
During the first six months of 2020, cash flow from operations of $12.94 billion surged 42.1% year over year.
Mixed Capital Position
Cash and short-term investments as of June 30, 2020 were $25.59 billion, up 79.7% from the level as of Dec 31, 2019.
Long-term debt of $39.9 billion at June-end was up 8.4% from the level at 2019 end.
2020 Guidance Intact
The company reaffirmed its earlier-issued earnings outlook for 2020 including net earnings of $15.45-$15.75 per share and adjusted net earnings of $16.25-$16.55. Further revisions for earnings will depend on how the COVID-19 pandemic unleashes it effect on the company’s business.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -22.33% due to these changes.
VGM Scores
Currently, UnitedHealth has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, UnitedHealth has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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UnitedHealth (UNH) Up 4.7% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for UnitedHealth Group (UNH - Free Report) . Shares have added about 4.7% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is UnitedHealth due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
UnitedHealth's Earnings in Q2 Beat on Lower Payouts
UnitedHealth Group Inc.’s second-quarter 2020 earnings of $7.12 per share surpassed the Zacks Consensus Estimate by 37.45%. This also compares favorably with earnings of $3.60 per share a year ago.
Better-than-expected earnings were driven lower by an unprecedented, temporary deferral of care in the company’s risk-based businesses, as hospital elective payouts were put on hold due to the coronavirus outbreak.
UnitedHealth’s revenues of $62.1 billion missed the Zacks Consensus Estimate by 2.7%. However, the top line improved 2.5% year over year, aided by broad-based revenue growth at Optum and UnitedHealthcare.
Medical care ratio of 70.2% improved 1290 basis points year over year, mainly owing to the temporary deferral of care amid the pandemic.
Operating cost ratio of 16.1% increased 220 basis points due to the health insurance tax, COVID-19 response efforts and business mix.
Total operating cost of $52.9 billion was down 5.3% year over year, mainly on account of lower medical costs.
Strong Segmental Performances
In the reported quarter, the company’s health benefits segment, UnitedHealthcare, generated revenues worth $49.1 billion, up 1% year over year. Revenue growth was attributable to strong Medicare Advantage and dual special needs plans, partly offset by a decline in commercial enrollment.
The company’s business groups, namely Medicare and Retirement plus Community and State contributed to growth, partly offset by lower contribution from Employer and individual and Global segments. Earnings from operations worth $7 billion were up from $2.6 billion last year, backed by the temporary impact of deferred care, net of COVID-19 treatment costs and the initial impact of a decelerating economy.
Revenues from another segment, Optum, improved 16.8% year over year to $32.7 billion, reflecting robust contributions from the sub-segments of OptumHealth (up 27.8%), OptumInsight (12.6%) and OptumRx (up 13%). Earnings from operations rose 6.3% year over year to $2.2 billion.
The segment gained from the company’s efforts in different areas, which included extending geographic presence and adding distinctive capabilities through strategic acquisitions in infusion services (Diplomat Pharmacy), post-acute care (NaviHealth) and digital behavioral health (AbleTo); launching the Boulder Community Health partnership; providing testing services in California, Indiana and Florida and introducing digital-at-home and rare-disease pharmacy programs.
Decline in Membership Enrollment
The company served 48.4 million people in the quarter, down 2.2% year over year, thanks to lower member enrollment in the Commercial and International business.
During the first six months of 2020, cash flow from operations of $12.94 billion surged 42.1% year over year.
Mixed Capital Position
Cash and short-term investments as of June 30, 2020 were $25.59 billion, up 79.7% from the level as of Dec 31, 2019.
Long-term debt of $39.9 billion at June-end was up 8.4% from the level at 2019 end.
2020 Guidance Intact
The company reaffirmed its earlier-issued earnings outlook for 2020 including net earnings of $15.45-$15.75 per share and adjusted net earnings of $16.25-$16.55. Further revisions for earnings will depend on how the COVID-19 pandemic unleashes it effect on the company’s business.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -22.33% due to these changes.
VGM Scores
Currently, UnitedHealth has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, UnitedHealth has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.