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UnitedHealth Group Incorporated (UNH) reported second-quarter 2024 adjusted earnings per share (EPS) of $6.80, which beat the Zacks Consensus Estimate by 2.3%. The bottom line rose 10.7% year over year.
Revenues amounted to $98.9 billion, which improved 6.4% 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 $98.7 billion.
The strong-quarterly performance was supported by growth in people served domestically through United Healthcare and under UNH’s value-based care arrangements through Optum. Growing services businesses also contributed to the quarterly results. However, the upside was partly offset by a significant increase in medical costs, the cost of products sold, and poor Optum Insight profit levels.
UnitedHealth Group Incorporated price-consensus-eps-surprise-chart | UnitedHealth Group Incorporated Quote
The medical care ratio of UnitedHealth Group deteriorated 190 basis points (bps) year over year to 85.1% in the second quarter, which came higher than the Zacks Consensus Estimate of 84.4%. The metric included a 65 bps impact from accommodations made to care providers and 25 bps related to South American actions.
The operating cost ratio of 13.3% improved 160 bps year over year.
Total operating costs were $91 billion, which escalated 7.2% year over year due to an increase in medical and cost of products sold. The figure came higher than our estimate of $90.7 billion.
UNH’s operating earnings deteriorated 2.3% year over year to $7.9 billion. The net margin deteriorated to 4.3% in the quarter under review compared with 5.9% in the year-ago period.
The health benefits business of UnitedHealth Group, UnitedHealthcare, generated revenues of $73.9 billion in the second quarter. The figure rose 5.3% year over year on the back of domestic membership growth and beat the Zacks Consensus Estimate of $73.7 billion.
Earnings from operations declined 9.1% year over year to $4 billion and missed the consensus mark of $4.4 billion. The operating margin of 5.4% deteriorated 80 bps year over year.
Revenues in the Optum business line were $62.9 billion, which climbed 11.7% year over year in the quarter under review. The figure outpaced the Zacks Consensus Estimate of $62.7 billion.
Earnings from operations of $3.9 billion improved 5.4% year over year but missed the consensus mark of $4.3 billion. The operating margin deteriorated 40 bps year over year to 6.2%.
The Optum segment was aided by strong contributions from the sub-units Optum Health and Optum Rx. Optum Health benefited on the back of an expanding customer base under value-based care arrangements. Meanwhile, Optum Rx gained from new client additions as well as growth in its specialty and community-based pharmacy offerings. Adjusted scripts grew 5.3% year over year in the second quarter of 2024.
The UnitedHealthcare business served 50.4 million people as of Jun 30, 2024, which decreased 4.6% year over year due to membership decline in its Global Commercial and Medicaid businesses. The figure lagged the Zacks Consensus Estimate of 50.9 million.
UnitedHealth Group exited the second quarter with cash and short-term investments of $31.3 billion, which rose from $29.6 billion at 2023-end. The company reported total assets of $286.1 billion at the second-quarter end compared with $273.7 billion at 2023-end.
Long-term debt, less of current maturities, amounted to $63.7 billion, which increased from $58.2 billion at 2023-end. The short-term borrowings and current portion of long-term debt were $11.4 billion.
Total equity of $94.7 billion increased from $94.4 billion at 2023 end.
UnitedHealth Group generated operating cash flows of $7.9 billion in the first half of 2024, which fell by a huge margin primarily due to the impact of the cyber-attack on Change Healthcare.
UNH rewarded $6.7 billion to its shareholders in the form of share repurchases and dividends in the first half of 2024. The company increased its annual rate of dividend by 12% in June 2024.
Management expects its 2024 net EPS in the range of $15.95-$16.4, reflecting the impact of remaining South American operations and costs incurred with respect to the cyber-attack.
Management affirmed its forecast for 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.
The company expects to incur direct response costs in the range of $1.3-$1.35 per share in 2024.
It expects a per-share business disruption impact of 60-70 cents in 2024.
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.
UnitedHealth Group currently has a Zacks Rank #4 (Sell).
Here are three other companies from the Medical space that are likely to report their respective quarterly earnings soon.
Amphastar Pharmaceuticals, Inc. AMPH has an Earnings ESP of +3.32% and carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Amphastar Pharmaceuticals’ bottom line for the to-be-reported quarter indicates 20% year-over-year growth. AMPH beat earnings estimates in each of the past four quarters, the average surprise being 28.6%.
Encompass Health Corporation EHC has an Earnings ESP of +0.36% and carries a Zacks Rank #3.
The Zacks Consensus Estimate for Encompass Health’s bottom line for the to-be-reported quarter indicates 6.3% year-over-year growth. EHC beat earnings estimates in each of the past four, with an average surprise of 18.7%.
HCA Healthcare, Inc. HCA has an Earnings ESP of +7.10% and carries a Zacks Rank of 2 (Buy).
The Zacks Consensus Estimate for HCA Healthcare’s EPS for the to-be-reported quarter indicates a 15.9% year-over-year jump. HCA beat earnings estimates in three of the past four quarters, missed once, the average surprise being 5.6%.
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UnitedHealth Group Incorporated (UNH) : Free Stock Analysis Report
Amphastar Pharmaceuticals, Inc. (AMPH) : Free Stock Analysis Report
HCA Healthcare, Inc. (HCA) : Free Stock Analysis Report
Encompass Health Corporation (EHC) : Free Stock Analysis Report
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