UnitedHealth (UNH) Beats on Q4 Earnings, Revises 2018 View
UnitedHealth Group Inc. UNH came up with earnings of $2.59 per share, beating the Zacks Consensus Estimate of $2.50. Earnings also rose 22.7% year over year.
Higher revenues, strength in both its segments, UnitedHealthcare and Optum, and membership growth led to the outperformance.
UnitedHealth has a tradition of guiding conservatively and then beating its own estimates to surprise investors.
The stock gained 3.54% in the pre-market trading session and we expect earnings outperformance to drive the stock higher.
Beneficiary of Tax Reform
The company enjoyed a non-cash benefit of $1.22 per share from the revaluation of its net deferred tax liability, as a result of the recent tax reform.
UnitedHealth Group Incorporated Price, Consensus and EPS Surprise
UnitedHealth Group Incorporated Price, Consensus and EPS Surprise | UnitedHealth Group Incorporated Quote
Behind the Headlines
UnitedHealth recorded revenues of $52.1 billion, which surpassed the Zacks Consensus Estimate of $51.5 billion. Also, it compared favorably with the year-ago number of $47.5 billion.
Total operating cost of $48.1 billion increased 8.4% year over year, due to a surge in medical cost.
Net margin of 6.9% increased from 3.5% in the year-ago quarter.
Strong Performance Across Segments
In the reported quarter, the company’s health benefits segment, UnitedHealthcare, reported revenues of $41.6 billion, up 9.6% year over year. Earnings from operations increased 26% year over year to $1.8 billion.
Revenues from Optum improved 10% year over year to $24.4 billion, reflecting strong contribution from subsegments OptumHealth and OptumInsight as well as OptumRx. Earnings from operations surged 23.8% year over year to $2.2 billion. Continued focus on accelerating growth as well as improving margins and productivity through enhanced integration and business alignment led to the overall improvement of this segment.
Membership Enrollment Surges
The company’s medical enrollment grew 1.9% year over year to 49.5 million, led by growth in members served in the Public and Senior segment, partially offset by lower Commercial and International membership.
Capital Position Improves
Cash and short-term investments at quarter end were $15.5 billion, up 16.7% from the 2016-end level.
Debt-to-total capital ratio was 38.9% at Dec 31, 2017, down 740 basis points year over year.
Cash flows from operations were $13.6 billion, up 39% year over year.
Guidance Update
UnitedHealth revised its 2018 financial outlook to reflect the effects of the U.S. corporate tax law changes. It now expects 2018 net earnings of $11.65 to $11.95 per share and adjusted net earnings of $12.30 to $12.60 per share. Cash flows from operations are expected to range from $15 billion to $15.5 billion.
Other Stocks That Warrant a Look
UnitedHealth, with a Zacks Rank #3 (Hold), has got this reporting cycle off to a flying start. While the other players in the space are lined up to report their financial results, below are three that are poised to beat on earnings as per our model.
Centene Corp. CNC is expected to report fourth-quarter earnings results on Feb 6. The company has an Earnings ESP of +0.25% and a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Anthem Inc. ANTM has an Earnings ESP of +1.36% and a Zacks Rank #2 (Buy). The company is expected to release fourth-quarter earnings results on Jan 31.
Humana Inc. HUM has an Earnings ESP of +0.44% and a Zacks Rank #1. The company is expected to announce fourth-quarter earnings results on Feb 7.
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