UnitedHealth Group Incorporated’s ( UNH Quick Quote UNH - Free Report) fourth-quarter 2020 earnings of $2.52 per share outpaced the Zacks Consensus Estimate by 5.4%. However, the bottom line plunged 35.4% year over year due to elevated costs and other factors related to the COVID-19 pandemic. Nevertheless, the company’s healthcare utilization that was earlier disrupted by the pandemic has attained normalcy.
UnitedHealth’s revenues of $65.5 billion beat the Zacks Consensus Estimate by 0.6% and improved 7.5% year over year. The uptick can be attributed to revenue growth at both Optum and, the community and senior benefit businesses of UnitedHealthcare.
Total operating costs for the fourth quarter increased 11% year over year to nearly $62 billion on account of higher medical and operating costs, increased cost of products sold, and depreciation and amortization.
Revenues of $257.1 billion improved 6.2% year over year. Earnings per share of $16.88 grew 11.7% year over year and came ahead of the company’s previously provided guidance of $16.50-$16.75.
For 2020, medical care ratio of 79.1% improved 340 basis points (bps) from 2019, primarily owing to the temporary deferral of care amid the pandemic and return of the health insurance tax. This was partially offset by the company’s COVID-19 assistance measures, and testing and treatment expenses.
The operating cost ratio of 16.2% increased 170 bps due to the return of the health insurance tax, COVID-19 response efforts and higher investments in service, innovation and growth. Nevertheless, persistent operating efficiency gains have partially benefited the results.
In the reported quarter, the company’s health benefits segment UnitedHealthcare generated revenues worth $50.3 billion, up 4.4% year over year. The rise in revenues was attributable to solid growth witnessed in serving community and senior programs, partly offset by a decline in commercial enrollment.
Earnings from operations worth $396 million were down 81.1% year over year due to the impact of higher COVID-19 testing and care costs, partially mitigated by higher revenues.
Revenues from another segment, Optum, rose 20.5% year over year to $35.9 billion, reflecting robust contributions from the sub-segments of OptumHealth (up 31.9%), OptumInsight (up 1.7%) and OptumRx (up 17.8%). Earnings from operations rose 3.3% year over year to $3.1 billion.
OptumHealth continued with its strong growth, driven by further inclusion of people catered to in value-based care arrangements and the increasing acuity of the care services provided. While OptumInsight revenues were driven by growth in managed services, OptumRx gained from higher script volumes
Decline in Membership Enrollment
The company served 48.44 million people in the quarter, down 0.7 million year over year due to lower member enrollment in the Commercial business.
Cash and short-term investments as of Dec 31, 2020 were $19.8 billion, up 38.9% from the level as of 2019-end.
Long-term debt of $38.6 billion at December-end was up 5% from the level at 2019 end.
During the year, cash flow from operations of $22.2 billion improved 20.1% year over year.
2021 Guidance Reaffirmed
The company re-established its full-year earnings per share outlook for 2021. While net earnings are expected between $16.90 and $17.40, adjusted net earnings are forecasted in the range of $17.75 to $18.25.
UnitedHealth currently carries a Zacks Rank #3 (Hold). You can see
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