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Will Optum Aid UnitedHealth Group's (UNH) Q3 Earnings?

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In the third quarter, we expect earnings growth at UnitedHealth Group Inc.’s (UNH - Free Report) health services business Optum. Increased revenues and earnings from operations should accrue from better productivity and overall cost management initiatives.

The primary growth drivers for Optum are pharmacy care services, care delivery, technology, government services and international. Management is considering the expansion of the health service business to 35-40% of operating income over the long term. To achieve this end, the company has been making acquisitions in this segment.

From 2014 to 2017, the segment compounded revenues at 24% per year and operating earnings at 26% a year. The trend continued in the first half of 2018, with revenues and earnings growing 10% and 25% year over year.

A number of acquisitions made in this segment, use of advanced technology, market-leading health analytics, modern care delivery and data-driven population health approaches lend Optum a long runway for growth. Each sub-segment is expected to deliver a solid performance, driving the segment’s growth in turn. The Zacks Consensus Estimate for the segment’s total revenues for the third quarter are $25.6 billion, up 11.8% year over year.

OptumHealth Revenue and earnings from operations should see a traction from organic and acquisition-related growth in care delivery and behavioral health, digital consumer engagement and health financial services. The Zacks Consensus Estimate for total revenues for this sub-segment is $6.2 billion, up 17.3% year over year.

OptumInsight revenues and earnings from operations should grow on the back of organic and acquisition related growth in technology, payer services and care provider advisory services. The Zacks Consensus Estimate for total revenues for this sub-segment is $2.3 billion, up 15% year over year.

OptumRx Revenue and earnings from operations at OptumRx  should gain from organic customer growth. The unit has been serving adjusted scripts and the trends is expected to ne maintained in the third quarter. The Zacks Consensus Estimate for total revenues for this sub-segment is $17.1 billion, up 7.1% year over year.

(Read more: Will UnitedHealth's Revenue Growth Aid Q3 Earnings?)

UnitedHealth Group carries a Zacks Rank #2 (Buy). Other stocks in the same space Molina Healthcare, Inc. (MOH - Free Report) , Aetna Inc. (AET - Free Report) and Cigna Corp. (CI - Free Report) by virtue of their favorable Zacks Rank and a positive Earnings ESP should beat earnings estimates in Q3.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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