UnitedHealth Group kicked off the Q3 results for the managed-care industry before Friday's open, easily topping estimates and slightly raising the low end of 2023 earnings guidance. UNH stock, a Dow Jones component, rose in early Friday stock market action.
UnitedHealth's medical costs came in lower than expected as a share of premiums, continuing to assuage concerns since its June warning that Medicare Advantage costs were running on the high side amid more outpatient elective surgeries.
In a Friday morning note, Jefferies analyst David Windley wrote that UnitedHealth's Q3 cost trend should further calm nerves after the "utilization scare."
The company attributed growth to an increase in the number of people served by its Optum health services and UnitedHealthcare managed care divisions, as well as the broadening scope of services.
UnitedHealth Earnings
Estimates: Analysts expected UnitedHealth earnings per share to rise 9% to $6.33 on revenue growth of 13% to $91.4 billion, according to FactSet.
Results: UnitedHealth's adjusted earnings rose 13.3% vs. a year earlier to $6.56 per share, ending a three-quarter string of slowing growth. Revenue climbed 14.2% to $92.36 billion.
The medical cost ratio, paid benefits as a share of premiums, rose to 82.3% vs. 81.6% in the year-ago quarter, while coming in below 82.8% estimates.
UNH added 55,000 Medicare Advantage members from Q2, while the number of people served under Medicaid fell by 290,000 to 8.065 million amid eligibility redeterminations. Domestic commercial customers rose by 75,000.
Windley noted that the loss of Medicaid membership was "in-line to slightly worse" than consensus.
The Optum Health services unit saw revenue jump to 22% to $56.7 billion amid the acquisition of Change Healthcare and expansion of its value-based care delivery initiatives, in which pay relates to performance, rather than being paid for each service. Optum Health revenue per consumer served increased 27% in Q3.
While Optum's operating profit margin improved to 6.6% in Q3, up 20 basis points from Q2, Windley said that fell short of expectations and raised a question about whether an 8% margin in 2024 would be attainable.
Outlook: UNH raised full-year 2023 EPS guidance to a range of $24.85-$25 from $24.70-$25. The analyst EPS consensus is $24.83, according to FactSet.
UNH Stock
In early Friday stock market action, UnitedHealth stock rose 1.5% to 533.50.
UnitedHealth stock's rise before the open put it on track to hit at least its highest level since April, having fully recovered from the June warning on outpatient surgeries.
UNH stock has a 558.10 buy point from a 50-week consolidation. UNH is part of IBD's Long-Term Leaders list and is ranked No. 1 by IBD in the Medical-Managed Care group, according to IBD Stock Checkup.
