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Can High Medical Costs Affect UnitedHealth (UNH) Q3 Earnings?
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UnitedHealth Group Incorporated (UNH - Free Report) is set to report its third-quarter 2023 results on Oct 13, before the opening bell.
Where Do the Estimates Stand?
The Zacks Consensus Estimate for third-quarter earnings per share of $6.33 suggests a 9.3% increase from the prior-year figure of $5.79. The consensus mark remained stable over the past week. The consensus estimate for third-quarter revenues of $91.4 billion indicates a 13% increase from the year-ago reported figure.
UnitedHealth beat the consensus estimate for earnings in all the prior four quarters, with the average being 3.4%. This is depicted in the graph below:
UnitedHealth Group Incorporated Price and EPS Surprisea
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.
Q2 Earnings Rewind
The healthcare plan provider reported adjusted earnings of $6.14 per share for the last quarter, beating the Zacks Consensus Estimate by 3.7% on the back of 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.
Now, let’s see how things have shaped up before the third-quarter earnings announcement.
Q3 Factors to Note
UnitedHealth's third-quarter results are estimated to have been bolstered by elevated premiums, which were underpinned by robust growth in its membership base. Our estimation of premium revenues indicates a year-over-year increase exceeding 9%, primarily attributable to higher premiums generated from both Optum Health and its health benefits business.
While our estimate for product revenues indicates 2% year-over-year growth, the same for services revenues predicts a 33.6% jump from the year-ago level. UNH's third-quarter top-line performance is expected to have been boosted by increased service revenues across the board.
We expect revenues from UnitedHealthcare, UNH’s largest segment that sells insurance, to have increased on higher memberships in selected programs. The Zacks Consensus Estimate for UnitedHealthcare’s total commercial customers signals 3.1% year-over-year growth. Our estimate for segmental revenues indicates a more than 8% year-over-year growth. Furthermore, investments and other income are estimated to have witnessed a nearly 47% surge from the year-ago level.
We are looking for higher contributions from each of the sub-segments of the Optum business segment, in the third quarter. A rise in the number of people being catered to in value-based care arrangements and the growing strength of affiliated physicians are major tailwinds.
Our estimate for operating income from the Optum business segment suggests a 21% year-over-year increase. This is expected to have positioned the company for year-over-year growth in the bottom line.
However, rising medical and operating costs are expected to have elevated UnitedHealth’s overall expense level in the quarter. We expect higher costs of products sold to have reduced its margins. Seniors undergoing elective procedures, which were delayed due to the pandemic, are expected to have accelerated medical costs.
The Zacks Consensus Estimate for UNH’s medical care ratio is pegged at 82.82%, up from 81.60% in the year-ago quarter. Our estimates for medical and operating costs indicate 10.5% and 7.4% year-over-year increases, respectively. These are expected to have affected its profit levels in the third 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 0.00%. This is because the Most Accurate Estimate currently stands at $6.33 per share, in line with the Zacks Consensus Estimate.
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 Apellis’ earnings per share for the to-be-reported quarter indicates a 44.6% 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 +1.58% 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 all the past four quarters, the average surprise being 8.4%.
Centene Corporation (CNC - Free Report) has an Earnings ESP of +15.68% and is a Zacks #3 Ranked player.
The Zacks Consensus Estimate for Centene’s bottom line for the to-be-reported quarter indicates an increase of 15.4% 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.
Image: Bigstock
Can High Medical Costs Affect UnitedHealth (UNH) Q3 Earnings?
UnitedHealth Group Incorporated (UNH - Free Report) is set to report its third-quarter 2023 results on Oct 13, before the opening bell.
Where Do the Estimates Stand?
The Zacks Consensus Estimate for third-quarter earnings per share of $6.33 suggests a 9.3% increase from the prior-year figure of $5.79. The consensus mark remained stable over the past week. The consensus estimate for third-quarter revenues of $91.4 billion indicates a 13% increase from the year-ago reported figure.
UnitedHealth beat the consensus estimate for earnings in all the prior four quarters, with the average being 3.4%. This is depicted in the graph below:
UnitedHealth Group Incorporated Price and EPS Surprisea
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.
Q2 Earnings Rewind
The healthcare plan provider reported adjusted earnings of $6.14 per share for the last quarter, beating the Zacks Consensus Estimate by 3.7% on the back of 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.
Now, let’s see how things have shaped up before the third-quarter earnings announcement.
Q3 Factors to Note
UnitedHealth's third-quarter results are estimated to have been bolstered by elevated premiums, which were underpinned by robust growth in its membership base. Our estimation of premium revenues indicates a year-over-year increase exceeding 9%, primarily attributable to higher premiums generated from both Optum Health and its health benefits business.
While our estimate for product revenues indicates 2% year-over-year growth, the same for services revenues predicts a 33.6% jump from the year-ago level. UNH's third-quarter top-line performance is expected to have been boosted by increased service revenues across the board.
We expect revenues from UnitedHealthcare, UNH’s largest segment that sells insurance, to have increased on higher memberships in selected programs. The Zacks Consensus Estimate for UnitedHealthcare’s total commercial customers signals 3.1% year-over-year growth. Our estimate for segmental revenues indicates a more than 8% year-over-year growth. Furthermore, investments and other income are estimated to have witnessed a nearly 47% surge from the year-ago level.
We are looking for higher contributions from each of the sub-segments of the Optum business segment, in the third quarter. A rise in the number of people being catered to in value-based care arrangements and the growing strength of affiliated physicians are major tailwinds.
Our estimate for operating income from the Optum business segment suggests a 21% year-over-year increase. This is expected to have positioned the company for year-over-year growth in the bottom line.
However, rising medical and operating costs are expected to have elevated UnitedHealth’s overall expense level in the quarter. We expect higher costs of products sold to have reduced its margins. Seniors undergoing elective procedures, which were delayed due to the pandemic, are expected to have accelerated medical costs.
The Zacks Consensus Estimate for UNH’s medical care ratio is pegged at 82.82%, up from 81.60% in the year-ago quarter. Our estimates for medical and operating costs indicate 10.5% and 7.4% year-over-year increases, respectively. These are expected to have affected its profit levels in the third 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 0.00%. This is because the Most Accurate Estimate currently stands at $6.33 per share, in line with the Zacks Consensus Estimate.
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:
Apellis Pharmaceuticals, Inc. (APLS - Free Report) has an Earnings ESP of +59.37% and is a Zacks #2 Ranked player. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Apellis’ earnings per share for the to-be-reported quarter indicates a 44.6% 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 +1.58% 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 all the past four quarters, the average surprise being 8.4%.
Centene Corporation (CNC - Free Report) has an Earnings ESP of +15.68% and is a Zacks #3 Ranked player.
The Zacks Consensus Estimate for Centene’s bottom line for the to-be-reported quarter indicates an increase of 15.4% 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.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.