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Can High Medical Costs Affect UnitedHealth's (UNH) Q1 Earnings?
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UnitedHealth Group Incorporated (UNH - Free Report) is set to report its first-quarter 2024 results on Apr 16, 2024, before the opening bell.
Where Do the Estimates Stand?
The Zacks Consensus Estimate for first-quarter earnings per share of $6.70 suggests a 7% increase from the prior-year figure of $6.26. The consensus mark declined by a penny over the past week. The consensus estimate for first-quarter revenues of $99.4 billion indicates an 8.1% increase from the year-ago reported figure.
UnitedHealth beat the consensus estimate for earnings in all the prior four quarters, with the average being 2.7%. This is depicted in the graph below:
RenaissanceRe Holdings Ltd. 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.
Q4 Earnings Rewind
The healthcare plan provider reported adjusted earnings of $6.16 per share for the last quarter, beating the Zacks Consensus Estimate by 3% on the back of a growing customer base under UnitedHealth Group’s value-based care arrangements. The consistent growth of the services businesses also contributed to the quarterly results. However, the upside was partly offset by a significant increase in medical costs.
Now, let’s see how things have shaped up before the first-quarter earnings announcement.
Q1 Factors to Note
UnitedHealth's first-quarter results are expected to benefit from higher premiums, driven by the expansion of its membership base. The Zacks Consensus Estimate for premium revenues for the first quarter indicates nearly 8% year-over-year growth, whereas our model estimate predicts a 6% increase. This growth is mainly due to increased premiums from both Optum Health and its health benefits divisions.
UNH's first-quarter top-line performance was expected to have been enhanced by a rise in service revenues across the board. Our estimates project an impressive, almost 13% jump in service revenues, while product revenues are expected to have seen more than 8% year-over-year growth from the year-ago level.
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 domestic commercial customers signals 4.3% year-over-year growth. The consensus mark for segmental revenues indicates 7.3% year-over-year growth, whereas Our estimate implies a 6% gain. Furthermore, the consensus estimate for investments and other income signals a nearly 28% surge from the year-ago level.
We are expecting higher contributions from each of the sub-segments of the Optum business segment in the first quarter. A rise in the number of people being catered to in value-based care arrangements and the growing strength of pharmacy offerings are major tailwinds. The addition of Change Healthcare is a driving factor at Optum.
The Zacks Consensus Estimate for operating income from the Optum business segment suggests a nearly 12% year-over-year increase, while the same from UnitedHealthcare indicates more than 3% growth. These are 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. The expected growth in healthcare utilization, especially in the Medicare Advantage space, can affect margins. Additionally, seniors resuming elective procedures are expected to have accelerated medical costs.We expect higher costs of products sold to have further reduced its margins.
The Zacks Consensus Estimate for UNH’s medical care ratio is pegged at 83.67%, up from 82.20% in the year-ago quarter. Our estimates for medical costs and costs of products soldindicate 8.1% and 6.3% year-over-year increases, respectively. These factors are expected to have affected its profit growth levels in the first 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 -1.80%. This is because the Most Accurate Estimate currently stands at $6.58 per share, lower than the Zacks Consensus Estimate of $6.70.
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 Inspire Medical’s bottom line for the to-be-reported quarter has improved by 3.1% over the past month. INSP beat earnings estimates in each of the past four quarters, the average surprise being 353.6%.
Edwards Lifesciences Corporation (EW - Free Report) has an Earnings ESP of +1.68% and a Zacks Rank #2.
The Zacks Consensus Estimate for Edwards Lifesciences’ bottom line for the to-be-reported quarter indicates 3.2% year-over-year growth. EW beat earnings estimates in two of the past four quarters and met on the other occasions, with an average surprise of 0.8%.
Universal Health Services, Inc. (UHS - Free Report) has an Earnings ESP of +0.71% and is a Zacks #2 Ranked player.
The Zacks Consensus Estimate for Universal Health’s earnings per share for the to-be-reported quarter indicates a 33.3% year-over-year jump. UHS beat earnings estimates in each of the past four quarters, the average surprise being 5.9%.
Image: Bigstock
Can High Medical Costs Affect UnitedHealth's (UNH) Q1 Earnings?
UnitedHealth Group Incorporated (UNH - Free Report) is set to report its first-quarter 2024 results on Apr 16, 2024, before the opening bell.
Where Do the Estimates Stand?
The Zacks Consensus Estimate for first-quarter earnings per share of $6.70 suggests a 7% increase from the prior-year figure of $6.26. The consensus mark declined by a penny over the past week. The consensus estimate for first-quarter revenues of $99.4 billion indicates an 8.1% increase from the year-ago reported figure.
UnitedHealth beat the consensus estimate for earnings in all the prior four quarters, with the average being 2.7%. This is depicted in the graph below:
RenaissanceRe Holdings Ltd. Price and EPS Surprise
RenaissanceRe Holdings Ltd. price-eps-surprise | RenaissanceRe Holdings Ltd. 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.
Q4 Earnings Rewind
The healthcare plan provider reported adjusted earnings of $6.16 per share for the last quarter, beating the Zacks Consensus Estimate by 3% on the back of a growing customer base under UnitedHealth Group’s value-based care arrangements. The consistent growth of the services businesses also contributed to the quarterly results. However, the upside was partly offset by a significant increase in medical costs.
Now, let’s see how things have shaped up before the first-quarter earnings announcement.
Q1 Factors to Note
UnitedHealth's first-quarter results are expected to benefit from higher premiums, driven by the expansion of its membership base. The Zacks Consensus Estimate for premium revenues for the first quarter indicates nearly 8% year-over-year growth, whereas our model estimate predicts a 6% increase. This growth is mainly due to increased premiums from both Optum Health and its health benefits divisions.
UNH's first-quarter top-line performance was expected to have been enhanced by a rise in service revenues across the board. Our estimates project an impressive, almost 13% jump in service revenues, while product revenues are expected to have seen more than 8% year-over-year growth from the year-ago level.
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 domestic commercial customers signals 4.3% year-over-year growth. The consensus mark for segmental revenues indicates 7.3% year-over-year growth, whereas Our estimate implies a 6% gain. Furthermore, the consensus estimate for investments and other income signals a nearly 28% surge from the year-ago level.
We are expecting higher contributions from each of the sub-segments of the Optum business segment in the first quarter. A rise in the number of people being catered to in value-based care arrangements and the growing strength of pharmacy offerings are major tailwinds. The addition of Change Healthcare is a driving factor at Optum.
The Zacks Consensus Estimate for operating income from the Optum business segment suggests a nearly 12% year-over-year increase, while the same from UnitedHealthcare indicates more than 3% growth. These are 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. The expected growth in healthcare utilization, especially in the Medicare Advantage space, can affect margins. Additionally, seniors resuming elective procedures are expected to have accelerated medical costs.We expect higher costs of products sold to have further reduced its margins.
The Zacks Consensus Estimate for UNH’s medical care ratio is pegged at 83.67%, up from 82.20% in the year-ago quarter. Our estimates for medical costs and costs of products soldindicate 8.1% and 6.3% year-over-year increases, respectively. These factors are expected to have affected its profit growth levels in the first 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 -1.80%. This is because the Most Accurate Estimate currently stands at $6.58 per share, lower than the Zacks Consensus Estimate of $6.70.
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:
Inspire Medical Systems, Inc. (INSP - Free Report) has an Earnings ESP of +18.04% 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 Inspire Medical’s bottom line for the to-be-reported quarter has improved by 3.1% over the past month. INSP beat earnings estimates in each of the past four quarters, the average surprise being 353.6%.
Edwards Lifesciences Corporation (EW - Free Report) has an Earnings ESP of +1.68% and a Zacks Rank #2.
The Zacks Consensus Estimate for Edwards Lifesciences’ bottom line for the to-be-reported quarter indicates 3.2% year-over-year growth. EW beat earnings estimates in two of the past four quarters and met on the other occasions, with an average surprise of 0.8%.
Universal Health Services, Inc. (UHS - Free Report) has an Earnings ESP of +0.71% and is a Zacks #2 Ranked player.
The Zacks Consensus Estimate for Universal Health’s earnings per share for the to-be-reported quarter indicates a 33.3% year-over-year jump. UHS beat earnings estimates in each of the past four quarters, the average surprise being 5.9%.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.