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Will UnitedHealth's (UNH) Benefits Business Aid Q3 Earnings?

Zacks Equity Research

UnitedHealth Group Inc.’s UNH health service segment UnitedHealthcare is likely to have performed well in the third quarter, which may reflect on the quarterly results, slated for release on Oct 15.

UnitedHealthcare benefits business has been a major contributor to the company’s top-line growth.

In the last reported quarter, revenues from UnitedHealthcare grew 6.1% year over year. Revenue growth was driven by higher enrollment and increase in pricing. All the business groups – Employer and Individual, Medicare and Retirement and Community and State contributed to the growth. Earnings from operations were up 12.1% year over year to $2.6 billion, led by revenue growth and cost control.

Click here to know how the company’s overall third-quarter performance is expected to be.

Let’s Delve Deeper

UnitedHealthcare has consistently witnessed balanced growth, serving increasingly diverse markets. Among these growing market segments are Medicaid, including people needing long-term services and support and dual eligible individuals; seniors, including Medicare Advantage and Part D plans, as well as employer sponsored retiree groups; large national employers, along with medium and small employer groups; and emerging markets, like global health benefits, social services, personalized wellness and caregiver services.

The segment is likely to have seen an increase in membership in the third quarter, primarily as a result of acquisitions and growth in services to self-funded employers and seniors.

Within UnitedHeathcare, fee-based commercial group business should have benefitted from an acquisition.

Revenues from Medicare Advantage business is likely to show an increase due to growth in people served through individual and employer-sponsored group Medicare Advantage plans.

UnitedHealthcare Community & State revenues should have gained from growth in people served with higher acuity needs.

The segment’s operating earnings should have benefitted from operating cost management.

Zacks Rank & Key Picks

Currently, UnitedHealth carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader healthcare sector include Molina Healthcare, Inc. MOH, Cigna Corp. CI and HCA Healthcare, Inc. HCA. While Molina sports a Zacks Rank #1 (Strong Buy), Cigna and HCA Healthcare carry a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth for Molina Healthcare, Cigna and HCA Healthcare is currently projected at 9.6%, 11.7% and 11.3%, respectively.

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