Back to top

Analyst Blog

UnitedHealth Group Inc. (UNH - Analyst Report) reported its third-quarter 2013 earnings of $1.53 per share, missing the Zacks Consensus Estimate by a penny. Earnings, however, grew 2.0% year over year.
 
The year-over-year earnings growth came on the back of higher revenues and increased enrollment. Despite the close miss, results reflected a solid performance from its health benefits business along with strong growth from Optum segment. 
 
Net income was up 0.8% year over year to $1.57 billion.
 
UnitedHealth posted revenues of $30.6 billion, up 12.1% year over year but down from the Zacks Consensus Estimate  of $30.9 billion. The year-over-year increase was an outcome of broad-based organic growth and business expansion in both health care benefits and health care services.
 
The quarter saw a spike in medical care ratio which increased 160 basis points year over year to 80.6%. The increase was driven by government reductions in Medicare Advantage program funding, a greater mix of revenues from government benefit offerings and lower levels of reserve development in the current year.
 
Total operating cost came in at $28.0 billion up 13.4% year over year. The increase was primarily driven by higher medical cost. 
 
Segment Performance
 
During the reported quarter, UnitedHealth’s health benefits segment – UnitedHealthcare – witnessed revenue growth of 11.0% year over year to $28.4 billion. Earnings from operations of $2.0 decreased 9.1% year over year.
 
Revenue from the UnitedHealth’s other segment – the health services segment branded as Optum – improved 33.3% to $9.6 billion on a year-over-year basis. Earnings from operations, surged 53.9% year over year to $628 million. Continued progress on Optum’s plan to accelerate growth and improve margins and productivity by strengthening integration and business alignment aided the improvement.
 
Membership Enrollment
 
UnitedHealth ended the quarter with 45.275 million members, up 8.730 million members year-over-year.
 
Capital Position
 
UnitedHealth generated cash flows from operations of $3.4 billion up 9.7% year over year.
 
The company ended the quarter with debt to equity ratio of 34.4% down 20 basis points year over year. 
 
Shareholder’s equity was $32.01 billion up from $31.2 billion as of Dec 31, 2012.
 
Share Repurchases and Dividend
 
UnitedHealth Group spent $1.0 billion to buyback 14 million shares in the quarter. The company paid $280 million in dividends to shareholders. 
 
2013 Guidance Update
 
UnitedHealth pulled up the lower range of its earlier 2013 EPS forecast. It now expects earnings per share of $5.40 to $5.50. The company reiterated its 2013 revenue expectation of $122 billion.  
 
UnitedHealth carries a Zacks Rank #2 (Buy). Other players WellPoint Inc. (WLP - Analyst Report) with Zacks Rank #1 (Strong Buy), Aetna Inc. (AET - Analyst Report) and Humana Inc. (HUM - Analyst Report), both with Zacks Rank #2 (Buy), are also expected to release their third quarter earnings shortly.   

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
RPC INC RES 24.91 +8.35%
LITHIA MOTO… LAD 94.59 +4.60%
DELTA AIR L… DAL 39.15 +3.90%
FLAMEL TECH… FLML 14.51 +3.50%
SOUTHWEST A… LUV 28.87 +2.92%