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UnitedHealth (UNH) Beats on Q2 Earnings, Hikes '21 EPS View

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UnitedHealth Group Incorporated UNH reported second-quarter 2021 earnings of $4.70 per share, which outpaced the Zacks Consensus Estimate by 6.6%. The bottom line declined 34% year over year due to escalating costs and broad-based postponement of care in the prior-year quarter due to the COVID-19 pandemic, partly offset by growing revenues.

Revenues of the healthcare provider were $71.3 billion, which climbed 14.8% year over year. The upside was driven by revenue growth at both the business units — UnitedHealthcare and Optum. The top line beat the Zacks Consensus Estimate by 3%.

The company’s medical care ratio of 82.8% deteriorated 1260 basis points (bps) year over year primarily due to the adverse effects of the pandemic.

Operating cost ratio of 14.5% improved 160 bps year over year in the second quarter, courtesy of repeal of the health insurance tax, the pandemic-induced effects on revenues and persistent productivity advances. The metric has been partly offset by business mix and investments undertaken.

Total operating costs for the second quarter escalated 23.5% year over year to $65.3 billion due to increased medical and operating costs, higher cost of products sold, and rise in depreciation and amortization.

UnitedHealth Group Incorporated Price, Consensus and EPS Surprise

UnitedHealth Group Incorporated Price, Consensus and EPS Surprise
UnitedHealth Group Incorporated Price, Consensus and EPS Surprise

UnitedHealth Group Incorporated price-consensus-eps-surprise-chart | UnitedHealth Group Incorporated Quote

Segmental Performances

In the reported quarter, the company’s health benefits segment UnitedHealthcare generated revenues of $55.5 billion in the quarter. The year-over-year revenue growth of 13% was driven by increase in the number of people served through the segment’s community and senior offerings.

Earnings from operations have reduced to more than two-fold year over year to $3.1 billion. The decline was due to the pandemic-induced care deferral in 2020, partially mitigated by higher revenues.

Revenues from another segment, Optum, improved 17.2% year over year to $38.3 billion, on the back of solid contributions from the sub-segments of OptumHealth (up 45.5%), OptumInsight (up 12.3%) and OptumRx (up 5.4%). Earnings from operations of $2.9 billion advanced 29.1% year over year in the second quarter.

OptumHealth continued to perform well courtesy of higher number of people being catered to in value-based care arrangements and growing affiliated physician. While OptumInsight revenues stemmed from growth in comprehensive managed services, OptumRx gained from higher script volumes.

Increase in Membership Enrollment

The company served 49.63 million people in the quarter, up 1.2 million lives year over year owing to increased member enrollment in the Community and Senior business, partly offset by lower membership in Commercial business.

Mixed Financial Position

The company exited the second quarter with cash and short-term investments of $22.6 billion, up 14.1% from the 2020-end level.

As of Jun 30, 2021, long-term debt of $44.3 billion increased 14.7% from the level at 2020 end.

Debt to total capital came in at 40.1% at second-quarter end, which improved 80 bps year over year.

Return on equity was 25.2% in the quarter.

Decline in Cash Flows

For the six months ended Jun 30, 2021, cash flows from operations totaled $11.5 billion but declined 10.8% from the year-ago comparable period.

Share Repurchase and Dividend Update

In the reported quarter, the company rewarded shareholders with dividends worth $1.4 billion. It repurchased 3.2 million shares for a total cost $1.2 billion in the quarter.

2021 EPS Guidance Hiked

Concurrent with second-quarter results, the company revised its earnings outlook for 2021.

Net earnings per share are now expected between $17.35-$17.85, higher than the prior guidance of $17.15-$17.65.

Adjusted earnings are projected in the range of $18.30-$18.80 per share, up from the previous estimate of $18.10-$18.60.

Zacks Rank

UnitedHealth Group currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Upcoming Releases

Here are some companies worth considering from the healthcare sector as our model shows that these have the right combination of elements to beat on earnings this reporting cycle:

Molina Healthcare, Inc. MOH has an Earnings ESP of +2.40% and a Zacks Rank of 2 at present.

MEDNAX, Inc. MD has an Earnings ESP of +0.50% and a Zacks Rank of 2, presently.

Anthem, Inc. ANTM has an Earnings ESP of +0.33% and a Zacks Rank #3 (Hold), currently.


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Anthem, Inc. (ANTM) : Free Stock Analysis Report

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