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UnitedHealth (UNH) Beats on Q4 Earnings, Retains 2023 View
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UnitedHealth Group Incorporated (UNH - Free Report) has reported fourth-quarter 2022 adjusted earnings of $5.34 per share, which beat the Zacks Consensus Estimate of $5.17 and our estimate of $5.13. The bottom line improved from $4.48 per share reported a year ago.
The company’s quarterly performance was driven by sustained membership growth in its UnitedHealthcare business. Strong expansion in value-based arrangements at the Optum Health segment also contributed to the upside. However, the upside was partly offset by elevated operating costs.
Revenues of UNH were $82.8 billion in the fourth quarter, which climbed from $73.7 billion a year ago on the back of sound contributions made by the UnitedHealthcare and Optum business lines. The top line met the consensus mark but marginally missed our estimate of $83 billion.
UnitedHealth Group Incorporated Price, Consensus and EPS Surprise
The medical care ratio of UnitedHealth Group improved 20 basis points year over year to 82.8% in the quarter under review, in line with our estimate.
The 2022 operating cost ratio of 14.7% decreased from 14.8% due to consistent productivity gains. Nevertheless, it was partly offset by the business mix and continued investments undertaken by UNH to pursue growth opportunities.
Total operating costs amounted to $75.9 billion in the fourth quarter, which increased 11.3% year over year, lower than our estimate of 12% growth. The year-over-year increase was due to higher medical costs, operating expenses, cost of products sold, and depreciation and amortization.
Fourth-quarter operating earnings were $6.9 billion, up from $5.5 billion a year ago, which beat our estimate of $6.6 billion.
Net margin of 5.8% improved from 5.5% a year ago and beat our estimate of the same.
Business Platforms’ Performances
The health benefits business of UnitedHealth Group, UnitedHealthcare, reported revenues of $63 billion, which improved from $56.4 billion a year ago and beat our estimate of $62.5 billion.
Earnings from operations climbed to $2.9 billion in the fourth quarter from $2.1 billion in the prior-year period and marginally beat our estimate of $2.8 billion. The operating margin was at 4.7%, up from 3.8% a year ago. The improvement can be attributed to strong membership growth and consistent management of medical and operating costs.
Revenues from another business line, Optum, totaled $47.9 billion, up from $41.1 billion in the year-ago period on the back of significant growth across each of the segments. However, it marginally missed our estimate of $48 billion.
The Optum Health segment, which has been gaining from a greater number of people served under value-based care arrangements and consistent strengthening of care delivery services, contributed the most to Optum’s top-line growth.
Optum Insight and Optum Rx segments also exhibited impressive performances in the fourth quarter. While Optum Insight revenues gained on the addition of Change Healthcare, the performance of Optum Rx benefited from the broadening of pharmacy care services.
Earnings from overall Optum business operations grew 17.6% year over year to $4 billion in the quarter under review and beat our estimate of $3.8 billion. The operating margin was flat at 8.3%.
The Uptick in Membership Enrollment
The UnitedHealthcare segment catered to 51,695 thousand people as of Dec 31, 2022, up 1,065 thousand year over year, owing to the overall domestic medical offerings of the unit. This was partially offset by a decline in commercial global numbers.
Financial Position (as of Dec 31, 2022)
UnitedHealth Group exited the fourth quarter with cash and short-term investments of $27.9 billion, which increased from the 2021-end level of $23.9 billion. Total assets of $245.7 billion climbed from the figure of $212.2 billion at the 2021-end.
Long-term debt, less current maturities of $54.5 billion, escalated from the 2021-end figure of $42.4 billion. The short-term borrowings and current portion of long-term debt were at $3.1 billion.
Return on equity for 2022 was 27.2%.
Increase in Cash Flows
In 2022, UnitedHealth Group generated cash flows from operations of $26.2 billion, which increased from the prior-year level of $22.3 billion.
Share Repurchase and Dividend Update
In 2022, UnitedHealth rewarded its shareholders with share repurchases of $7 billion and dividends of $6 billion.
2023 Guidance
Backed by the performance exhibited by UNH in 2022 and growth projections, UnitedHealth reiterated its 2023 outlook.
The company expects the top line to be $357-$360 billion in 2023, suggesting a rise from the 2022 reported level of $324.2 billion. Adjusted net earnings are expected to be $24.40-$24.90 per share, whereas it reported $22.19 in 2022. Further, UNH expects an operating cash flow of $27-$28 billion.
The Zacks Consensus Estimate for Biodesix’s 2022 earnings indicates an 11.4% improvement from the prior-year reported number. BDSX has witnessed one upward estimate revision in the past 60 days against none in the opposite direction.
The Zacks Consensus Estimate for MedAvail Holdings’ 2022 bottom line indicates a 37.3% improvement from the prior-year reported number. MDVL has witnessed one upward estimate revision in the past 60 days against none in the opposite direction.
The Zacks Consensus Estimate for AMN Healthcare’s 2022 bottom line indicates a 44% improvement from the prior-year reported number. The consensus estimate for AMN’s top line suggests 30.1% year-over-year growth.
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UnitedHealth (UNH) Beats on Q4 Earnings, Retains 2023 View
UnitedHealth Group Incorporated (UNH - Free Report) has reported fourth-quarter 2022 adjusted earnings of $5.34 per share, which beat the Zacks Consensus Estimate of $5.17 and our estimate of $5.13. The bottom line improved from $4.48 per share reported a year ago.
The company’s quarterly performance was driven by sustained membership growth in its UnitedHealthcare business. Strong expansion in value-based arrangements at the Optum Health segment also contributed to the upside. However, the upside was partly offset by elevated operating costs.
Revenues of UNH were $82.8 billion in the fourth quarter, which climbed from $73.7 billion a year ago on the back of sound contributions made by the UnitedHealthcare and Optum business lines. The top line met the consensus mark but marginally missed our estimate of $83 billion.
UnitedHealth Group Incorporated Price, Consensus and EPS Surprise
UnitedHealth Group Incorporated price-consensus-eps-surprise-chart | UnitedHealth Group Incorporated Quote
Q4 Business Performance
The medical care ratio of UnitedHealth Group improved 20 basis points year over year to 82.8% in the quarter under review, in line with our estimate.
The 2022 operating cost ratio of 14.7% decreased from 14.8% due to consistent productivity gains. Nevertheless, it was partly offset by the business mix and continued investments undertaken by UNH to pursue growth opportunities.
Total operating costs amounted to $75.9 billion in the fourth quarter, which increased 11.3% year over year, lower than our estimate of 12% growth. The year-over-year increase was due to higher medical costs, operating expenses, cost of products sold, and depreciation and amortization.
Fourth-quarter operating earnings were $6.9 billion, up from $5.5 billion a year ago, which beat our estimate of $6.6 billion.
Net margin of 5.8% improved from 5.5% a year ago and beat our estimate of the same.
Business Platforms’ Performances
The health benefits business of UnitedHealth Group, UnitedHealthcare, reported revenues of $63 billion, which improved from $56.4 billion a year ago and beat our estimate of $62.5 billion.
Earnings from operations climbed to $2.9 billion in the fourth quarter from $2.1 billion in the prior-year period and marginally beat our estimate of $2.8 billion. The operating margin was at 4.7%, up from 3.8% a year ago. The improvement can be attributed to strong membership growth and consistent management of medical and operating costs.
Revenues from another business line, Optum, totaled $47.9 billion, up from $41.1 billion in the year-ago period on the back of significant growth across each of the segments. However, it marginally missed our estimate of $48 billion.
The Optum Health segment, which has been gaining from a greater number of people served under value-based care arrangements and consistent strengthening of care delivery services, contributed the most to Optum’s top-line growth.
Optum Insight and Optum Rx segments also exhibited impressive performances in the fourth quarter. While Optum Insight revenues gained on the addition of Change Healthcare, the performance of Optum Rx benefited from the broadening of pharmacy care services.
Earnings from overall Optum business operations grew 17.6% year over year to $4 billion in the quarter under review and beat our estimate of $3.8 billion. The operating margin was flat at 8.3%.
The Uptick in Membership Enrollment
The UnitedHealthcare segment catered to 51,695 thousand people as of Dec 31, 2022, up 1,065 thousand year over year, owing to the overall domestic medical offerings of the unit. This was partially offset by a decline in commercial global numbers.
Financial Position (as of Dec 31, 2022)
UnitedHealth Group exited the fourth quarter with cash and short-term investments of $27.9 billion, which increased from the 2021-end level of $23.9 billion. Total assets of $245.7 billion climbed from the figure of $212.2 billion at the 2021-end.
Long-term debt, less current maturities of $54.5 billion, escalated from the 2021-end figure of $42.4 billion. The short-term borrowings and current portion of long-term debt were at $3.1 billion.
Return on equity for 2022 was 27.2%.
Increase in Cash Flows
In 2022, UnitedHealth Group generated cash flows from operations of $26.2 billion, which increased from the prior-year level of $22.3 billion.
Share Repurchase and Dividend Update
In 2022, UnitedHealth rewarded its shareholders with share repurchases of $7 billion and dividends of $6 billion.
2023 Guidance
Backed by the performance exhibited by UNH in 2022 and growth projections, UnitedHealth reiterated its 2023 outlook.
The company expects the top line to be $357-$360 billion in 2023, suggesting a rise from the 2022 reported level of $324.2 billion. Adjusted net earnings are expected to be $24.40-$24.90 per share, whereas it reported $22.19 in 2022. Further, UNH expects an operating cash flow of $27-$28 billion.
Zacks Rank & Stocks to Consider
UnitedHealth currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks from the broader medical space are Biodesix, Inc. (BDSX - Free Report) , MedAvail Holdings, Inc. and AMN Healthcare Services, Inc. (AMN - Free Report) , each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Biodesix’s 2022 earnings indicates an 11.4% improvement from the prior-year reported number. BDSX has witnessed one upward estimate revision in the past 60 days against none in the opposite direction.
The Zacks Consensus Estimate for MedAvail Holdings’ 2022 bottom line indicates a 37.3% improvement from the prior-year reported number. MDVL has witnessed one upward estimate revision in the past 60 days against none in the opposite direction.
The Zacks Consensus Estimate for AMN Healthcare’s 2022 bottom line indicates a 44% improvement from the prior-year reported number. The consensus estimate for AMN’s top line suggests 30.1% year-over-year growth.