UnitedHealth Raises Profit Targets on Higher Sales -- Update
16 October 2019 - 7:08AM
Dow Jones News
By Anna Wilde Mathews and Dave Sebastian
UnitedHealth Group Inc. boosted its profit guidance for the year
as revenue growth from its health-services and insurance units
fueled the company's third-quarter performance.
The company, parent of the nation's largest health insurer, also
on Tuesday offered initial comments about its expectations for
2020, which investors closely watch.
Wall Street reacted positively to the updates, sending shares up
more than 8% in late-afternoon trading on the New York Stock
Exchange. The stock had lost about 12% so far this year.
Regarding 2020 results, UnitedHealth Chief Executive David
Wichmann suggested on a call with analysts that adjusted earnings
per share growth could be around the lower end of the company's
typical 13% to 16% goal. That excluded the impact of the return of
an Affordable Care Act health-insurance tax, which had been
suspended for this year.
Mr. Wichmann estimated that tax would affect earnings per share
by around 50 cents in total, with 35 cents of that pulling down
results in 2020. He also suggested that analysts include a range of
about 15 cents around their projections.
Matthew Borsch, an analyst with BMO Capital Markets, said that
the implied midpoint of Mr. Wichmann's suggested range was lower
than current analyst projections for 2020, but it likely met
investors' expectations, coming on top of solid 2019 results. "It's
coming out the way people predicted," he said.
UnitedHealth typically offers cautious earnings guidance, which
it tends to consistently beat.
UnitedHealth officials steered clear of commenting on hot-button
political topics such as some Democratic presidential candidates'
proposals to replace private insurance with a universal government
plan.
Investor perception of political momentum around such "Medicare
for All" ideas has helped push down the shares of UnitedHealth and
other managed-care companies this year, analysts say.
UnitedHealth per-share earnings for 2019 are projected to reach
between $14.15 and $14.25, compared with the company's previous
forecast of $13.95 to $14.15. UnitedHealth said it expects adjusted
per-share earnings to come in between $14.90 and $15 a share,
compared with earlier projections of $14.70 a share to $14.90 a
share.
For the third quarter of 2019, earnings rose to $3.67 a share,
up 13% from the comparable period last year. Analysts were
expecting $3.55 a share.
UnitedHealth reported an adjusted profit of $3.88 a share,
topping analysts' estimates of $3.75 a share.
The company posted sales of $60.35 billion for the third
quarter, up 6.7% from the comparable quarter a year ago and beating
the $59.76 billion analysts polled by FactSet had expected. Sales
for the Optum health-services business grew 13% to $28.8 billion
compared with the year-ago period.
The medical loss ratio for UnitedHealthcare, the insurance arm,
was 82.4%, which analysts said was in line with projections. The
medical loss ratio represents the share of premiums paid out in
claims.
The figure was higher than the year-ago result, largely because
of the suspended health-insurance tax, the company said. The tax, a
pass-through, had previously increased the revenue part of the
ratio.
Analysts also pointed to an extra weekday in the quarter,
compared with the previous year, as a factor that could increase
MLR.
UnitedHealth executives said medical expenses had matched their
expectations, with outpatient and physician costs slightly lower
than projected and inpatient in line with estimates.
Sales for the UnitedHealthcare health-benefits platform grew
4.8% to $48.1 billion during the quarter as commercial and Medicare
Advantage membership grew, UnitedHealth said.
Write to Anna Wilde Mathews at anna.mathews@wsj.com
(END) Dow Jones Newswires
October 15, 2019 15:53 ET (19:53 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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