UnitedHealth raised its profit outlook after beating earnings estimates Friday. UNH stock rose.
"Growth in the third quarter was driven by continued expansion in the number of people served throughout UnitedHealthcare and in the value-based care initiatives at Optum Health," the Dow Jones health insurance giant said in its earnings news release.
The report kicks off third-quarter results for health insurers.
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UnitedHealth Earnings
Estimates: Analysts polled by FactSet expected UnitedHealth earnings to rise 20% vs. a year earlier to $5.43 per share. Revenue was seen climbing 11% to $80.573 billion.
Results: UnitedHealth earnings rose 28% to $5.79 a share, the second straight quarter of faster EPS growth. Revenue grew nearly 12% to $80.894 billion, though that's the second quarter of slightly slowing revenue gains.
UnitedHealth's medical cost ratio came in at 81.6% vs. 81.5% in Q2 2022 and 83% in Q3 2021, "due to COVID effects and business mix." Analysts had expected it to decline 0.8%, year over year, to 82.4%.
The metric measures medical expenses paid as a share of premiums.
Outlook: UnitedHealth raised its full-year EPS forecast to $21.85-$22.05 from its prior view of $21.40-$21.90, largely reflecting Q3's 36-cent beat.
Analysts had forecast UnitedHealth earnings per share to rise 15% to $21.87.
UNH Stock Gaps Up
Shares of UnitedHealth gained nearly 1% to 514.79 amid a broad decline on the stock market today. But UNH stock closed at session lows, failing an attempt to clear the 50-day moving average.
Still, the Dow stock made its first weekly advance in five weeks. On Thursday, shares had hit their worst levels in nearly four months before rebounding 2% higher.
UnitedHealth stock has formed a flat base with a 553.23 buy point, and is well below the entry for now.
That flat base is within a larger consolidation going back six months.
Rivals Molina Healthcare, Humana and Cigna have been leading the market, trading right around consolidation buy points as investors pour into defense growth names. But Centene has come under strain, while CVS Health has tumbled, in large part due to its Aetna insurance unit.
UnitedHealth is in between. UNH stock has pulled back since Aug. 19. But its relative strength line making a new high, marked by a blue dot at the end of that line on the weekly MarketSmith chart.
Year to date, UNH stock carries a 2.2% gain vs. an 18.3% drop for the Dow Jones Industrial Average as a whole.
Optum Health, Medicare In Spotlight
UnitedHealth reported its Optum Health unit delivered 34% revenue growth to $18.643 billion.
The fast-growing Optum unit has become a key driver of UnitedHealth earnings. The service has benefited from the expansion of value-based care initiatives, and further growth in revenue per consumer would be a positive sign.
But on Sept. 5, UnitedHealth and Amazon lost their reported bids to acquire home care tech platform Signify Health. Instead, CVS Health purchased Signify Health in a deal valued at $8 billion.
UnitedHealth's Optum offers similar aging-in-place services, via the purchase of Landmark Health in 2021. It also announced the purchase of home health provider LHC Group in April.
At-home services are key for Medicare members.
For health insurers, the Medicare business itself is favorably poised for growth, with the U.S. set to boost Medicare Advantage payments by 8.5% in 2023.
However, UnitedHealth, along with Centene and CVS' Aetna, will lose Medicare Advantage bonus payments due to lower performance ratings. That news hit all three stocks last Friday.
Investors in UNH stock will look for continued growth in Medicare and Medicaid membership.
