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Will High Medical Costs Affect UnitedHealth (UNH) Q2 Earnings?
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UnitedHealth Group Incorporated (UNH - Free Report) is set to report its second-quarter 2023 results on Jul 14, before the opening bell.
Where Do the Estimates Stand?
The Zacks Consensus Estimate for second-quarter earnings per share of $6.03 suggests an 8.3% increase from the prior-year figure of $5.57. The consensus mark has witnessed two upward revisions and four downward movements in the past 30 days. The consensus estimate for second-quarter revenues of $90.6 billion indicates a 12.8% increase from the year-ago reported figure.
UnitedHealth beat the consensus estimate for earnings in all the prior four quarters, with the average being 4%. This is depicted in the graph below:
UnitedHealth Group Incorporated Price and EPS Surprise
Before we get into what to expect for the to-be-reported quarter in detail, it’s worth taking a look at UNH’s previous-quarter performance first.
Q1 Earnings Rewind
The healthcare plan provider reported adjusted earnings of $6.26 per share for the last quarter, beating the Zacks Consensus Estimate by 0.3% on the back of 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 positives were partly offset by elevated operating costs.
Increased premiums, backed by strong membership growth, are likely to have supported UnitedHealth’s second-quarter results. Our estimate for premium revenues suggests a 10% year-over-year increase, thanks to higher premiums generated from Optum Health and its health benefits business, UnitedHealthcare.
While our estimate for product revenues indicates more than 4% year-over-year growth, the same for services revenues suggests a more than 23% year-over-year jump from the year-ago level of $6,645 million. Higher services revenues across the board are likely to have aided UNH’s top line in the second quarter.
Revenues from UnitedHealthcare, UNH’s largest segment that sells insurance, are likely to have increased on higher memberships in selected programs. The Zacks Consensus Estimate for UnitedHealthcare’s total commercial customers signals 3.4% year-over-year growth. Our estimate for segmental revenues indicates a more than 9% year-over-year growth. Furthermore, investments and other income are likely to have witnessed a more than 150% surge from the year-ago level.
The Optum business segment is expected to have witnessed higher contributions from each of the sub-segments in the second quarter. A rise in the number of people being catered to in value-based care arrangements and the growing strength of affiliated physicians is likely to aid the results.
Our estimate for operating income from the Optum business segment suggests an 18.1% year-over-year increase. This is expected to have positioned the company for year-over-year growth in the bottom line.
However, UnitedHealth is likely to have faced an elevated expense level due to a rise in medical and operating costs. Higher costs of products sold are likely to have reduced its margins. Seniors undergoing elective procedures, which were delayed due to the pandemic, are likely to have accelerated medical costs.
The Zacks Consensus Estimate for UNH’s medical care ratio is pegged at 82.66%, up from 81.50% in the year-ago quarter. Our estimates for medical and operating costs indicate 12.2% and 9.8% year-over-year increases, respectively. This is likely to have affected its profit levels in the second quarter, making an earnings beat uncertain.
Earnings Whispers
Our proven model does not conclusively predict an earnings beat for UnitedHealth this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. That is not the case here, as you will see below.
Earnings ESP: The company’s Earnings ESP is -1.41%. This is because the Most Accurate Estimate currently stands at $5.94 per share, lower than the Zacks Consensus Estimate of $6.03.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: UnitedHealth currently carries a Zacks Rank #3.
Stocks to Consider
While an earnings beat looks uncertain for UnitedHealth, 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 Neogen’s earnings per share for the to-be-reported quarter is pegged at 3 cents, which improved 50% over the past 30 days. NEOG beat earnings estimates thrice in the past four quarters and missed once, the average surprise being 123.4%.
AstraZeneca PLC (AZN - Free Report) has an Earnings ESP of +4.44% and a Zacks Rank #3.
The Zacks Consensus Estimate for AstraZeneca’s bottom line for the to-be-reported quarter is pegged at 98 cents per share, which improved 3.2% in the past 60 days. AZN beat earnings estimates in all the past four quarters, the average surprise being 8.1%.
Community Health Systems, Inc. (CYH - Free Report) has an Earnings ESP of +33.72% and is a Zacks #2 Ranked player.
The Zacks Consensus Estimate for Community Health’s bottom line for the to-be-reported quarter indicates an improvement of 88.5% from the year-ago period. The consensus mark for CYH’s revenues is pegged at $3 billion, signaling 2.9% year-over-year growth.
Image: Bigstock
Will High Medical Costs Affect UnitedHealth (UNH) Q2 Earnings?
UnitedHealth Group Incorporated (UNH - Free Report) is set to report its second-quarter 2023 results on Jul 14, before the opening bell.
Where Do the Estimates Stand?
The Zacks Consensus Estimate for second-quarter earnings per share of $6.03 suggests an 8.3% increase from the prior-year figure of $5.57. The consensus mark has witnessed two upward revisions and four downward movements in the past 30 days. The consensus estimate for second-quarter revenues of $90.6 billion indicates a 12.8% increase from the year-ago reported figure.
UnitedHealth beat the consensus estimate for earnings in all the prior four quarters, with the average being 4%. This is depicted in the graph below:
UnitedHealth Group Incorporated Price and EPS Surprise
UnitedHealth Group Incorporated price-eps-surprise | UnitedHealth Group Incorporated Quote
Before we get into what to expect for the to-be-reported quarter in detail, it’s worth taking a look at UNH’s previous-quarter performance first.
Q1 Earnings Rewind
The healthcare plan provider reported adjusted earnings of $6.26 per share for the last quarter, beating the Zacks Consensus Estimate by 0.3% on the back of 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 positives were partly offset by elevated operating costs.
Now let’s see how things have shaped up before the second-quarter earnings announcement.
Q2 Factors to Note
Increased premiums, backed by strong membership growth, are likely to have supported UnitedHealth’s second-quarter results. Our estimate for premium revenues suggests a 10% year-over-year increase, thanks to higher premiums generated from Optum Health and its health benefits business, UnitedHealthcare.
While our estimate for product revenues indicates more than 4% year-over-year growth, the same for services revenues suggests a more than 23% year-over-year jump from the year-ago level of $6,645 million. Higher services revenues across the board are likely to have aided UNH’s top line in the second quarter.
Revenues from UnitedHealthcare, UNH’s largest segment that sells insurance, are likely to have increased on higher memberships in selected programs. The Zacks Consensus Estimate for UnitedHealthcare’s total commercial customers signals 3.4% year-over-year growth. Our estimate for segmental revenues indicates a more than 9% year-over-year growth. Furthermore, investments and other income are likely to have witnessed a more than 150% surge from the year-ago level.
The Optum business segment is expected to have witnessed higher contributions from each of the sub-segments in the second quarter. A rise in the number of people being catered to in value-based care arrangements and the growing strength of affiliated physicians is likely to aid the results.
Our estimate for operating income from the Optum business segment suggests an 18.1% year-over-year increase. This is expected to have positioned the company for year-over-year growth in the bottom line.
However, UnitedHealth is likely to have faced an elevated expense level due to a rise in medical and operating costs. Higher costs of products sold are likely to have reduced its margins. Seniors undergoing elective procedures, which were delayed due to the pandemic, are likely to have accelerated medical costs.
The Zacks Consensus Estimate for UNH’s medical care ratio is pegged at 82.66%, up from 81.50% in the year-ago quarter. Our estimates for medical and operating costs indicate 12.2% and 9.8% year-over-year increases, respectively. This is likely to have affected its profit levels in the second quarter, making an earnings beat uncertain.
Earnings Whispers
Our proven model does not conclusively predict an earnings beat for UnitedHealth this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. That is not the case here, as you will see below.
Earnings ESP: The company’s Earnings ESP is -1.41%. This is because the Most Accurate Estimate currently stands at $5.94 per share, lower than the Zacks Consensus Estimate of $6.03.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: UnitedHealth currently carries a Zacks Rank #3.
Stocks to Consider
While an earnings beat looks uncertain for UnitedHealth, 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:
Neogen Corporation (NEOG - Free Report) has an Earnings ESP of +33.33% and is a Zacks #1 Ranked player. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Neogen’s earnings per share for the to-be-reported quarter is pegged at 3 cents, which improved 50% over the past 30 days. NEOG beat earnings estimates thrice in the past four quarters and missed once, the average surprise being 123.4%.
AstraZeneca PLC (AZN - Free Report) has an Earnings ESP of +4.44% and a Zacks Rank #3.
The Zacks Consensus Estimate for AstraZeneca’s bottom line for the to-be-reported quarter is pegged at 98 cents per share, which improved 3.2% in the past 60 days. AZN beat earnings estimates in all the past four quarters, the average surprise being 8.1%.
Community Health Systems, Inc. (CYH - Free Report) has an Earnings ESP of +33.72% and is a Zacks #2 Ranked player.
The Zacks Consensus Estimate for Community Health’s bottom line for the to-be-reported quarter indicates an improvement of 88.5% from the year-ago period. The consensus mark for CYH’s revenues is pegged at $3 billion, signaling 2.9% year-over-year growth.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.