Lower first-quarter expenses aid UnitedHealth as it raises full-year outlook

By keeping medical expenses in check despite a heavy flu season, the largest healthcare insurer in the US, UnitedHealth Group (UNH) posted a first-quarter profit beating market estimates. Shares of the UnitedHealthcare parent inched almost 3% up before the market opened on Tuesday.

With total revenue jumping 13.3% to about $55.2 billion, the health insurer saw its earnings for the quarter soar 31% higher to $2.84 billion or $2.87 per share. Optum and UnitedHealthcare segments helped the total revenue spurt.

With these results, UnitedHealth added to the consecutive positive growth just like its prior four quarters. With its diversified revenue stream aiding the US top-dog, Optum — its biggest revenue driver has been growing rapidly amid acquisitions in the industry.

Based on the positive results, UnitedHealth raised its outlook for 2018, now expecting net earnings in the range of $11.70-11.95 per share and adjusted net earnings between $12.40 and 12.65 per share.

During the first quarter, Optum grew 11.1% in revenue. The unit also reported an improvement in its operating margin by 100 basis points to 7%. And the latest $5-billion acquisition of DaVita Medical Group clinics will further bolster this arm.

In the recent years, UnitedHealth consistently outdid its rivals. The company’s strategy of diversification — like gobbling the pharmacy-benefits manager Catamaran Corp in 2015 and its constant success with Optum — is pushing others in the industry to take bolder steps in consolidation (remember the CVS Health Corp-Aetna and Cigna-Express Scripts Holding Co deals.) With these constant successes, let’s wait and watch what ripple effect these numbers have on the healthcare industry.