We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
UnitedHealth (UNH) Up 8.1% Since Last Earnings Report: Can It Continue?
Read MoreHide Full Article
A month has gone by since the last earnings report for UnitedHealth Group (UNH - Free Report) . Shares have added about 8.1% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is UnitedHealth due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
UnitedHealth Group Tops on Q1 Earnings, Reaffirms EPS View
UnitedHealth Group reported first-quarter 2024 adjusted earnings per share (EPS) of $6.91 per share, which beat the Zacks Consensus Estimate by 4.2%. The bottom line rose 10.4% year over year.
Revenues amounted to $99.8 billion, which improved 8.6% year over year in the quarter under review on the back of strong performance in its UnitedHealthcare and Optum business lines. The top line outpaced the consensus mark of $99.2 billion.
The strong-quarterly performance was aided by growth in people served domestically and 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 and operating expenses.
First-Quarter Business Performance
The medical care ratio of UnitedHealth Group deteriorated 210 basis points (bps) year over year to 84.3% in the first quarter, which came higher than the Zacks Consensus Estimate of 84% and our estimate of 83.9%. The metric included a 40 bps impact from accommodations made to care providers.
The operating cost ratio of 14.1% improved 70 bps year over year.
Total operating costs were $91.9 billion, which escalated 9.6% year over year due to an increase in medical, operating expenses and cost of products sold. The figure came higher than our estimate of $90.3 billion.
UnitedHealth Group’s operating earnings deteriorated 2.5% year over year to $7.9 billion. The net margin deteriorated to negative 1.4% in the quarter under review compared with 6.1% in the year-ago period.
Performance of Business Platforms in Details
The health benefits business of UnitedHealth Group, UnitedHealthcare, generated revenues of $75.4 billion in the first quarter. The figure rose 7% year over year on the back of domestic membership growth but missed the Zacks Consensus Estimate of $75.5 billion.
Earnings from operations advanced 2.3% year over year to $4.4 billion and beat the consensus mark of $4.3 billion. The operating margin of 5.8% deteriorated 40 bps year over year.
Revenues in the Optum business line were $61.1 billion, which climbed 12.9% year over year in the quarter under review. The figure outpaced the Zacks Consensus Estimate of $59.9 billion and our estimate of $56.4 billion.
Earnings from operations of $3.5 billion declined 5.4% year over year and missed the consensus mark of $4.2 billion. The operating margin deteriorated 110 bps year over year to 5.8%.
The Optum segment was aided by strong contributions from the sub-units Optum Health, Optum Insight and Optum Rx. While Optum Health benefited on the back of an expanding customer base under value-based care arrangements, enhanced technology-enabled offerings drove Optum Insight’s revenues. Meanwhile, Optum Rx gained from new client additions as well as growth in its specialty and community-based pharmacy offerings. Adjusted scripts grew 4.5% year over year in the first quarter of 2024.
Decrease in Membership
The UnitedHealthcare business served 51.5 million people as of Mar 31, 2024, which decreased 2.7% year over year due to membership decline in its Global Commercial and Medicaid businesses. The figure lagged the Zacks Consensus Estimate of 54 million and our estimate of 54.1 million.
Financial Position (as of Mar 31, 2024)
UnitedHealth Group exited the first quarter with cash and short-term investments of $32.7 billion, which rose from $29.6 billion at 2023-end. The company reported total assets of $284.2 billion at first quarter end compared with $273.7 billion at 2023-end.
Long-term debt, less of current maturities, amounted to $63.9 billion, which increased from $58.2 billion at 2023-end. The short-term borrowings and current portion of long-term debt were $9.8 billion.
Total equity of $92.4 billion declined from $94.4 billion at 2023 end.
Decline in Cash Flows
UnitedHealth Group generated operating cash flows of $1.1 billion in the first quarter of 2024, which fell by a huge margin primarily due to the impact of the cyber-attack on Change Healthcare.
Capital Deployment Update
UnitedHealth Group rewarded $4.8 billion to its shareholders in the form of share repurchases and dividends in the first quarter of 2024.
2024 Outlook
Management expects 2024 net EPS in the range of $17.6-$18.2, reflecting the impact of Brazil’s sales and costs incurred with respect to the cyber-attack.
Management forecasts adjusted net EPS between $27.50 and $28.00, the mid-point of which indicates an improvement of 10.5% from the 2023 figure of $25.12.
Revenues were earlier estimated to lie between $400 billion and $403 billion in 2024, the mid-point of which suggests 8% growth from the 2023 figure of $371.6 billion. Operating cash flows are projected within $30-$31 billion.
The company expects to incur direct response costs in the range of 85-95 cents per share in 2024.
It also expects a per share business disruption impact of 30-40 cents in 2024.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
VGM Scores
Currently, UnitedHealth has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, UnitedHealth has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
UnitedHealth (UNH) Up 8.1% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for UnitedHealth Group (UNH - Free Report) . Shares have added about 8.1% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is UnitedHealth due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
UnitedHealth Group Tops on Q1 Earnings, Reaffirms EPS View
UnitedHealth Group reported first-quarter 2024 adjusted earnings per share (EPS) of $6.91 per share, which beat the Zacks Consensus Estimate by 4.2%. The bottom line rose 10.4% year over year.
Revenues amounted to $99.8 billion, which improved 8.6% year over year in the quarter under review on the back of strong performance in its UnitedHealthcare and Optum business lines. The top line outpaced the consensus mark of $99.2 billion.
The strong-quarterly performance was aided by growth in people served domestically and 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 and operating expenses.
First-Quarter Business Performance
The medical care ratio of UnitedHealth Group deteriorated 210 basis points (bps) year over year to 84.3% in the first quarter, which came higher than the Zacks Consensus Estimate of 84% and our estimate of 83.9%. The metric included a 40 bps impact from accommodations made to care providers.
The operating cost ratio of 14.1% improved 70 bps year over year.
Total operating costs were $91.9 billion, which escalated 9.6% year over year due to an increase in medical, operating expenses and cost of products sold. The figure came higher than our estimate of $90.3 billion.
UnitedHealth Group’s operating earnings deteriorated 2.5% year over year to $7.9 billion. The net margin deteriorated to negative 1.4% in the quarter under review compared with 6.1% in the year-ago period.
Performance of Business Platforms in Details
The health benefits business of UnitedHealth Group, UnitedHealthcare, generated revenues of $75.4 billion in the first quarter. The figure rose 7% year over year on the back of domestic membership growth but missed the Zacks Consensus Estimate of $75.5 billion.
Earnings from operations advanced 2.3% year over year to $4.4 billion and beat the consensus mark of $4.3 billion. The operating margin of 5.8% deteriorated 40 bps year over year.
Revenues in the Optum business line were $61.1 billion, which climbed 12.9% year over year in the quarter under review. The figure outpaced the Zacks Consensus Estimate of $59.9 billion and our estimate of $56.4 billion.
Earnings from operations of $3.5 billion declined 5.4% year over year and missed the consensus mark of $4.2 billion. The operating margin deteriorated 110 bps year over year to 5.8%.
The Optum segment was aided by strong contributions from the sub-units Optum Health, Optum Insight and Optum Rx. While Optum Health benefited on the back of an expanding customer base under value-based care arrangements, enhanced technology-enabled offerings drove Optum Insight’s revenues. Meanwhile, Optum Rx gained from new client additions as well as growth in its specialty and community-based pharmacy offerings. Adjusted scripts grew 4.5% year over year in the first quarter of 2024.
Decrease in Membership
The UnitedHealthcare business served 51.5 million people as of Mar 31, 2024, which decreased 2.7% year over year due to membership decline in its Global Commercial and Medicaid businesses. The figure lagged the Zacks Consensus Estimate of 54 million and our estimate of 54.1 million.
Financial Position (as of Mar 31, 2024)
UnitedHealth Group exited the first quarter with cash and short-term investments of $32.7 billion, which rose from $29.6 billion at 2023-end. The company reported total assets of $284.2 billion at first quarter end compared with $273.7 billion at 2023-end.
Long-term debt, less of current maturities, amounted to $63.9 billion, which increased from $58.2 billion at 2023-end. The short-term borrowings and current portion of long-term debt were $9.8 billion.
Total equity of $92.4 billion declined from $94.4 billion at 2023 end.
Decline in Cash Flows
UnitedHealth Group generated operating cash flows of $1.1 billion in the first quarter of 2024, which fell by a huge margin primarily due to the impact of the cyber-attack on Change Healthcare.
Capital Deployment Update
UnitedHealth Group rewarded $4.8 billion to its shareholders in the form of share repurchases and dividends in the first quarter of 2024.
2024 Outlook
Management expects 2024 net EPS in the range of $17.6-$18.2, reflecting the impact of Brazil’s sales and costs incurred with respect to the cyber-attack.
Management forecasts adjusted net EPS between $27.50 and $28.00, the mid-point of which indicates an improvement of 10.5% from the 2023 figure of $25.12.
Revenues were earlier estimated to lie between $400 billion and $403 billion in 2024, the mid-point of which suggests 8% growth from the 2023 figure of $371.6 billion. Operating cash flows are projected within $30-$31 billion.
The company expects to incur direct response costs in the range of 85-95 cents per share in 2024.
It also expects a per share business disruption impact of 30-40 cents in 2024.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
VGM Scores
Currently, UnitedHealth has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, UnitedHealth has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.