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UnitedHealth (UNH) Q4 Earnings Top Estimates, Revenues up Y/Y

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Zacks Equity Research
·4 min read
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UnitedHealth Group Incorporated’s UNH fourth-quarter 2020 earnings of $2.52 per share outpaced the Zacks Consensus Estimate by 5.4%. However, the bottom line plunged 35.4% year over year due to elevated costs and other factors related to the COVID-19 pandemic. Nevertheless, the company’s healthcare utilization that was earlier disrupted by the pandemic has attained normalcy.

UnitedHealth’s revenues of $65.5 billion beat the Zacks Consensus Estimate by 0.6% and improved 7.5% year over year. The uptick can be attributed to revenue growth at both Optum and, the community and senior benefit businesses of UnitedHealthcare.

Total operating costs for the fourth quarter increased 11% year over year to nearly $62 billion on account of higher medical and operating costs, increased cost of products sold, and 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

2020 Results

Revenues of $257.1 billion improved 6.2% year over year. Earnings per share of $16.88 grew 11.7% year over year and came ahead of the company’s previously provided guidance of $16.50-$16.75.

For 2020, medical care ratio of 79.1% improved 340 basis points (bps) from 2019, primarily owing to the temporary deferral of care amid the pandemic and return of the health insurance tax. This was partially offset by the company’s COVID-19 assistance measures, and testing and treatment expenses.

The operating cost ratio of 16.2% increased 170 bps due to the return of the health insurance tax, COVID-19 response efforts and higher investments in service, innovation and growth. Nevertheless, persistent operating efficiency gains have partially benefited the results.

Segmental Performances

In the reported quarter, the company’s health benefits segment UnitedHealthcare generated revenues worth $50.3 billion, up 4.4% year over year. The rise in revenues was attributable to solid growth witnessed in serving community and senior programs, partly offset by a decline in commercial enrollment.

Earnings from operations worth $396 million were down 81.1% year over year due to the impact of higher COVID-19 testing and care costs, partially mitigated by higher revenues.

Revenues from another segment, Optum, rose 20.5% year over year to $35.9 billion, reflecting robust contributions from the sub-segments of OptumHealth (up 31.9%), OptumInsight (up 1.7%) and OptumRx (up 17.8%). Earnings from operations rose 3.3% year over year to $3.1 billion.

OptumHealth continued with its strong growth, driven by further inclusion of people catered to in value-based care arrangements and the increasing acuity of the care services provided. While OptumInsight revenues were driven by growth in managed services, OptumRx gained from higher script volumes

Decline in Membership Enrollment

The company served 48.44 million people in the quarter, down 0.7 million year over year due to lower member enrollment in the Commercial business.

Capital Position

Cash and short-term investments as of Dec 31, 2020 were $19.8 billion, up 38.9% from the level as of 2019-end.

Long-term debt of $38.6 billion at December-end was up 5% from the level at 2019 end.

During the year, cash flow from operations of $22.2 billion improved 20.1% year over year.

2021 Guidance Reaffirmed

The company re-established its full-year earnings per share outlook for 2021. While net earnings are expected between $16.90 and $17.40, adjusted net earnings are forecasted in the range of $17.75 to $18.25.

Zacks Rank

UnitedHealth currently carries a Zacks Rank #3 (Hold). 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:

Tenet Healthcare Corporation THC has an Earnings ESP of +7.10% and a Zacks Rank #1, currently.

Teladoc Health, Inc. TDOC has an Earnings ESP of +31.58% and a Zacks Rank of 2 (Buy), presently.

Halozyme Therapeutics, Inc. HALO has an Earnings ESP of +4.91% and a Zacks Rank of 3 at present.

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UnitedHealth Group Incorporated (UNH) : Free Stock Analysis Report
 
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