UnitedHealth (UNH) looks poised to report strong Q2 results

Over the years, UnitedHealth Group Incorporated (NYSE: UNH) has grown into a diversified healthcare conglomerate as it keeps investing in the business and pursuing acquisitions. The company’s vertical integration strategy helps expand its market share and stay unaffected by economic cycles. Currently, United Health is much bigger than its nearest competitors like Cigna and Aetna.

Shares of the Minnetonka-based company, a leading provider of insurance and wellness services, have gained consistently for more than a decade, with growth accelerating in recent years. Recovering quickly from temporary pullbacks and returning to the growth path, the stock rose to an all-time high in October 2022. UNH changed course since then and pared a part of those gains, but looks poised for a rebound that could take it close to last year’s peak. The Dow Jones topper — in terms of share price — recently hiked its dividend by an impressive 14% to $1.88 per share. Meanwhile, the stock has underperformed the S&P 500 index so far this year.

More Claims

During the pandemic, health insurance companies benefited from the cancellation and postponement of elective procedures even as healthcare facilities wanted to focus more on COVID care. However, the trend is reversing as patients and clinics proceed with the nonurgent procedures they delayed earlier. The resultant increase in claims will add to the costs of insurance companies like UnitedHealth and impact their earnings.

From UnitedHealth’s Q1 2023 earnings conference call:

“Over the past year, we focused on improving the consumer experience across our company. This consumer orientation is foundational in support of each of our growth priorities, including our approach to value-based care. For example, this year we expect to serve more than 4 million patients in fully accountable, value-based care arrangements through Optum, about double where we were at the end of 2021. These patients will be members of UnitedHealthcare benefit plans or one of the many other plans served by Optum.”

On July 14, before markets open, UnitedHealth will be publishing financial results for the second quarter of 2023. On average, Wall Street analysts estimate that revenues increased more than 13% to $90.97 billion in the June quarter. They see a 9% increase in adjusted earnings to $6.06 per share.

Financials

When it comes to bottom-line performance, the company enjoys the unique distinction of not missing quarterly earnings estimates for more than a decade. The trend continued in the most recent quarter when adjusted profit rose 14% to $6.26 per share. Buoyed by the positive outcome, UnitedHealth executives predict that adjusted earnings-per-share would increase to $24.50-25.0 in fiscal 2023.

Double-digit growth across the main operating segments pushed up revenues to about $92 billion in the first three months of the fiscal year. Premiums, which account for around 80% of total revenues, grew 14%. Revenues of the main UnitedHealthcare division moved up 13% and Optum revenues rose by 25%. The top line also exceeded expectations, continuing the recent trend.

UnitedHealth’s share price, which has been fluctuating ahead of the earnings, declined this week. The stock has lost 9% since the beginning of the year.