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UnitedHealth Group (UNH) Q3 Earnings Beat, Boosts '23 EPS View
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UnitedHealth Group Incorporated (UNH - Free Report) reported third-quarter 2023 adjusted earnings per share (EPS) of $6.56, which outpaced the Zacks Consensus Estimate by 3.6%. The bottom line advanced 13.3% year over year.
Revenues improved 14.2% year over year to $92.4 billion in the quarter under review, attributable to sound contributions made by the UnitedHealthcare and Optum business lines. The top line surpassed the consensus mark by 1%.
The strong quarterly results of UNH were aided by an expanding customer base under UNH’s value-based care arrangements. The solid performance of Optum’s sub-units also contributed to the quarterly results. However, the upside was partly offset by an elevated expense level.
UnitedHealth Group Incorporated Price, Consensus and EPS Surprise
UnitedHealth Group’s medical care ratio was 82.3%, which deteriorated 70 basis points (bps) year over year and beat our estimate by 40 bps.
The operating cost ratio deteriorated 60 bps year over year to 15% in the third quarter due to the business mix and continued investments with regard to future business growth.
Total operating costs of $83.8 billion escalated 14.2% year over year and came higher than our estimate of $81 billion. The year-over-year increase mainly stemmed from elevated medical and operating costs.
UNH reported operating earnings of $8.5 billion, which climbed 13.3% year over year in the quarter under review.
The net margin of 6.3% deteriorated 20 bps year over year and beat our estimate of 6.2%.
Business Platforms’ Performances
Revenues from the health benefits business of UnitedHealth Group, UnitedHealthcare, rose 13% year over year to $69.9 billion on the back of a growing membership base. The reported figure outpaced the Zacks Consensus Estimate of $68.7 billion and our estimate of $67.2 billion.
Earnings from operations came in at $4.6 billion in the third quarter, which improved 21% year over year and surpassed the consensus mark of $4.1 billion. The operating margin improved 50 basis points year over year to 6.6%.
Another business line, Optum, reported revenues of $56.7 billion, which climbed 22% year over year and beat the Zacks Consensus Estimate of $55.7 billion as well as our estimate of $54.1 billion.
Earnings from operations increased 5.4% year over year to $3.9 billion in the quarter under review but missed the consensus mark of $4.2 billion as well as our estimate of $4.4 billion. The operating margin of 6.9% deteriorated 100 bps year over year.
The Optum segment benefited from the solid performance of its sub-units, Optum Health, Optum Insight and Optum Rx. Optum Health was aided by catering to an expanding customer base under value-based care arrangements and consistent expansion of care services. While the addition of Change Healthcare provided an impetus to Optum Insight revenues, Optum Rx reported a significant growth in its home delivery, specialty, infusion and community-based pharmacy offerings.
The Uptick in Membership Enrollment
As of Sep 30, 2023, the UnitedHealthcare segment catered to 52.8 million people, which rose 2.8% year over year on the back of a higher number of people served with commercial and public sector program offerings. The reported figure fell short of the Zacks Consensus Estimate of 52.9 million and our estimate of 53.1 million.
Financial Position (as of Sep 30, 2023)
UnitedHealth Group exited the third quarter with cash and short-term investments of $44.1 billion, up from the 2022-end level of $27.9 billion. Total assets of $282.1 billion increased from $245.7 billion at 2022-end.
Long-term debt, less of current maturities, amounted to $58.1 billion, up from $54.5 billion as of Dec 31, 2022. The short-term borrowings and current portion of long-term debt were $5.3 billion.
Total equity of $89.6 billion rose from $81.5 billion at 2022-end.
In the reported quarter, the return on equity was 28%.
Increase in Cash Flows
UnitedHealth Group generated cash flows of $34.3 billion from operations in the first nine months of 2023, which rose 11.5% from the prior-year comparable period.
Capital Deployment Update
UNH rewarded $11.5 billion to its shareholders in the form of share repurchases and dividends during the first nine months of 2023.
2023 Outlook
On the basis of solid performance exhibited in the first nine months of 2023, coupled with durable growth and operating forecasts, adjusted net EPS is presently anticipated between $24.85 and $25.00, compared with the prior guidance of $24.70-$25.00. The mid-point of the revised guidance implies 12.3% growth from the 2022 figure.
Net EPS is projected to lie between $23.60 and $23.75 compared with the prior view of $23.45-$23.75.
Management had earlier expected revenues between $357 billion and $360 billion this year, the mid-point of which suggested 10.6% growth from the 2022 reported figure. Operating cash flows were estimated within $27-$28 billion for 2023.
Zacks Rank
UnitedHealth Group currently carries a Zacks Rank #3 (Hold).
Stocks to Consider
Here are some companies from the broader Medical space that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this time around:
The Zacks Consensus Estimate for Apellis’ earnings per share for the to-be-reported quarter indicates a 49.1% year-over-year improvement. APLS beat earnings estimates twice in the past four quarters and missed on two occasions, the average surprise being 1.4%.
AstraZeneca PLC (AZN - Free Report) has an Earnings ESP of +5.43% and a Zacks Rank #3.
The Zacks Consensus Estimate for AstraZeneca’s bottom line for the to-be-reported quarter is pegged at 82 cents per share, which improved 3.8% in the past 30 days. AZN beat earnings estimates in each of the past four quarters, the average surprise being 8.4%.
Centene Corporation (CNC - Free Report) has an Earnings ESP of +12.36% and carries a Zacks Rank #3.
The Zacks Consensus Estimate for Centene’s bottom line for the to-be-reported quarter indicates an increase of 18.5% from the year-ago period. The consensus mark for CNC’s revenues is pegged at $36.2 billion, signaling 0.8% year-over-year growth.
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UnitedHealth Group (UNH) Q3 Earnings Beat, Boosts '23 EPS View
UnitedHealth Group Incorporated (UNH - Free Report) reported third-quarter 2023 adjusted earnings per share (EPS) of $6.56, which outpaced the Zacks Consensus Estimate by 3.6%. The bottom line advanced 13.3% year over year.
Revenues improved 14.2% year over year to $92.4 billion in the quarter under review, attributable to sound contributions made by the UnitedHealthcare and Optum business lines. The top line surpassed the consensus mark by 1%.
The strong quarterly results of UNH were aided by an expanding customer base under UNH’s value-based care arrangements. The solid performance of Optum’s sub-units also contributed to the quarterly results. However, the upside was partly offset by an elevated expense level.
UnitedHealth Group Incorporated Price, Consensus and EPS Surprise
UnitedHealth Group Incorporated price-consensus-eps-surprise-chart | UnitedHealth Group Incorporated Quote
Q3 Business Performance
UnitedHealth Group’s medical care ratio was 82.3%, which deteriorated 70 basis points (bps) year over year and beat our estimate by 40 bps.
The operating cost ratio deteriorated 60 bps year over year to 15% in the third quarter due to the business mix and continued investments with regard to future business growth.
Total operating costs of $83.8 billion escalated 14.2% year over year and came higher than our estimate of $81 billion. The year-over-year increase mainly stemmed from elevated medical and operating costs.
UNH reported operating earnings of $8.5 billion, which climbed 13.3% year over year in the quarter under review.
The net margin of 6.3% deteriorated 20 bps year over year and beat our estimate of 6.2%.
Business Platforms’ Performances
Revenues from the health benefits business of UnitedHealth Group, UnitedHealthcare, rose 13% year over year to $69.9 billion on the back of a growing membership base. The reported figure outpaced the Zacks Consensus Estimate of $68.7 billion and our estimate of $67.2 billion.
Earnings from operations came in at $4.6 billion in the third quarter, which improved 21% year over year and surpassed the consensus mark of $4.1 billion. The operating margin improved 50 basis points year over year to 6.6%.
Another business line, Optum, reported revenues of $56.7 billion, which climbed 22% year over year and beat the Zacks Consensus Estimate of $55.7 billion as well as our estimate of $54.1 billion.
Earnings from operations increased 5.4% year over year to $3.9 billion in the quarter under review but missed the consensus mark of $4.2 billion as well as our estimate of $4.4 billion. The operating margin of 6.9% deteriorated 100 bps year over year.
The Optum segment benefited from the solid performance of its sub-units, Optum Health, Optum Insight and Optum Rx. Optum Health was aided by catering to an expanding customer base under value-based care arrangements and consistent expansion of care services. While the addition of Change Healthcare provided an impetus to Optum Insight revenues, Optum Rx reported a significant growth in its home delivery, specialty, infusion and community-based pharmacy offerings.
The Uptick in Membership Enrollment
As of Sep 30, 2023, the UnitedHealthcare segment catered to 52.8 million people, which rose 2.8% year over year on the back of a higher number of people served with commercial and public sector program offerings. The reported figure fell short of the Zacks Consensus Estimate of 52.9 million and our estimate of 53.1 million.
Financial Position (as of Sep 30, 2023)
UnitedHealth Group exited the third quarter with cash and short-term investments of $44.1 billion, up from the 2022-end level of $27.9 billion. Total assets of $282.1 billion increased from $245.7 billion at 2022-end.
Long-term debt, less of current maturities, amounted to $58.1 billion, up from $54.5 billion as of Dec 31, 2022. The short-term borrowings and current portion of long-term debt were $5.3 billion.
Total equity of $89.6 billion rose from $81.5 billion at 2022-end.
In the reported quarter, the return on equity was 28%.
Increase in Cash Flows
UnitedHealth Group generated cash flows of $34.3 billion from operations in the first nine months of 2023, which rose 11.5% from the prior-year comparable period.
Capital Deployment Update
UNH rewarded $11.5 billion to its shareholders in the form of share repurchases and dividends during the first nine months of 2023.
2023 Outlook
On the basis of solid performance exhibited in the first nine months of 2023, coupled with durable growth and operating forecasts, adjusted net EPS is presently anticipated between $24.85 and $25.00, compared with the prior guidance of $24.70-$25.00. The mid-point of the revised guidance implies 12.3% growth from the 2022 figure.
Net EPS is projected to lie between $23.60 and $23.75 compared with the prior view of $23.45-$23.75.
Management had earlier expected revenues between $357 billion and $360 billion this year, the mid-point of which suggested 10.6% growth from the 2022 reported figure. Operating cash flows were estimated within $27-$28 billion for 2023.
Zacks Rank
UnitedHealth Group currently carries a Zacks Rank #3 (Hold).
Stocks to Consider
Here are some companies from the broader Medical space that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this time around:
Apellis Pharmaceuticals, Inc. (APLS - Free Report) has an Earnings ESP of +13.77% and has a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Apellis’ earnings per share for the to-be-reported quarter indicates a 49.1% year-over-year improvement. APLS beat earnings estimates twice in the past four quarters and missed on two occasions, the average surprise being 1.4%.
AstraZeneca PLC (AZN - Free Report) has an Earnings ESP of +5.43% and a Zacks Rank #3.
The Zacks Consensus Estimate for AstraZeneca’s bottom line for the to-be-reported quarter is pegged at 82 cents per share, which improved 3.8% in the past 30 days. AZN beat earnings estimates in each of the past four quarters, the average surprise being 8.4%.
Centene Corporation (CNC - Free Report) has an Earnings ESP of +12.36% and carries a Zacks Rank #3.
The Zacks Consensus Estimate for Centene’s bottom line for the to-be-reported quarter indicates an increase of 18.5% from the year-ago period. The consensus mark for CNC’s revenues is pegged at $36.2 billion, signaling 0.8% year-over-year growth.