UnitedHealth GroupShares of the healthcare group rose on Friday after the healthcare group reported earnings Second Quarter Revenue and Adjusted Earnings That beat Wall Street expectations despite rising medical costs.
The results eased investor concerns after the Minnesota-based company spooked markets last month when it said demand for non-emergency surgeries and outpatient services had surged.
Shares of UnitedHealth closed up more than 7% on Friday. However, the stock is down more than 9% so far this year.
UnitedHealth Group is the largest healthcare company in the United States by market capitalization and revenue, bigger even than the largest U.S. bank. Given its size, UnitedHealth Group is considered a leader in the broader health insurance space. As of Friday’s close, its market capitalization was about $447 billion.
Here’s what UnitedHealth Group has to offer report Compared with Wall Street expectations, according to a Refinitiv survey of analysts:
- EPS: Adjusted $6.14 vs. $5.99 expected
- income: $92.9 billion vs. $91.01 billion expected
UnitedHealth reported net income of $5.47 billion, or $5.82 a share, for the quarter.This is the same as $5.07 billion, or $5.34 per share a year earlier. Excluding certain items, the company earned an adjusted $6.14 per share for the period.
The company reported total revenue of $92.9 billion for the quarter, up 16% from a year earlier.This does not include $33.6 billion “eliminate”, That’s a payment from the company’s UnitedHealthcare business to its other unit, Optum. UnitedHealth Group cannot record these transactions as revenue because it pays for itself.
UnitedHealthcare, which provides insurance and benefits services to more than 50 million people, posted a 13% year-over-year increase in second-quarter revenue to $70.2 billion.
Revenue from the company’s other platform, Optum, rose nearly 25% from a year earlier to $56.3 billion. Optum provides medical services and runs one of the largest pharmacy benefit managers, the middlemen that negotiate drug discounts with drugmakers on behalf of health insurers and large employers.
Optum’s growth was fueled in part by UnitedHealth Group’s roughly $8 billion acquisition Founder of healthcare technology company Change Healthcare.
The growth was also driven by a year-over-year increase of more than 900,000 patients served by Optum’s Health Services business under value-based care arrangements.
UnitedHealth Group raised the lower end of its full-year adjusted profit forecast to a range of $24.70 to $25.00 a share, from a previous range of $24.50 to $25.00.
The company’s medical cost ratio (claims payout as a percentage of premiums) is 83.2%. Analysts expect it to be 83.3% this quarter, according to FactSet.
Medical expenses rose nearly 2% from a year earlier. UnitedHealth said this was driven by the previously mentioned increase in elective surgery and outpatient care activity, primarily among older adults.
“As an example, outpatient care activity for seniors in the second quarter was several hundred basis points ahead of our expectations,” John Rex, UnitedHealth Group Chief Financial Officer, said on the earnings call.
Much of that care comes from older adults who are undergoing heart surgery and hip and knee replacements in outpatient clinics, Rex noted, repeating comments he made at a Goldman Sachs healthcare conference last month.
Rex said on the conference call that UnitedHealth Group expects medical cost ratios to be “slightly lower” in the third quarter than in the second quarter.
The company also expects medical cost ratios to be “slightly higher” in the third quarter than in the fourth, he added, noting that this is “just a seasonal factor.”
But overall, the company expects “the overall cadence of care activities to remain consistent,” Rex said.
Insurers have benefited from delays in non-emergency surgeries in recent years as hospital staffing shortages and the coronavirus pandemic overwhelmed hospitals with COVID-19 patients. It was widely believed that elective surgery was too risky in hospitals at the time.
But UnitedHealth executives say that trend may be reversing.