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UnitedHealth (UNH) Q1 Earnings & Revenues Top, View Lifted

Zacks

UnitedHealth Group Inc. UNH reported earnings of $3.04 per share, beating the Zacks Consensus Estimate of $2.92. The bottom line also rose 28.3% year over year.

UnitedHealth Group Incorporated Price, Consensus and EPS Surprise

UnitedHealth Group Incorporated Price, Consensus and EPS Surprise | UnitedHealth Group Incorporated Quote


Higher revenues, strength in both segments — UnitedHealthcare and Optum — plus membership growth led to this outperformance.

UnitedHealth has a tradition of guiding conservatively and then surpassing its own estimates to surprise investors.

The stock gained 1.79% in pre-market trading session and we expect earnings beat to drive the stock higher.

Behind the Headlines

UnitedHealth recorded revenues of $55.2 billion, which outpaced the Zacks Consensus Estimate of $54.9 billion. Moreover, the top line compared favorably with the year-ago figure of $48.7 billion.

Total operating cost of $51.1 billion increased 12.9% year over year.

Net margin expanded 60 basis points to 5.1%.

Strong Performance Across Segments

In the reported quarter, the company’s health benefits segment, UnitedHealthcare, logged revenues of $45.5 billion, up 13.3% year over year. Earnings from operations grew 12.3% year over year to $2.4billion.

Revenues from Optum improved 11.1% year over year to $23.6 billion, reflecting strong contributions from subsegments, namely OptumHealth and OptumInsight as well as OptumRx. Earnings from operations surged 29.2% year over year to $1.7 billion. A steady focus on accelerating growth as well as improving margins and productivity through enhanced integration and business alignment led to the segment’s overall improvement.

Membership Enrollment Increases

The company’s medical enrollment ascended 4.7% year over year to 48.9 million, led by growth in members served in the Public and Senior segment, partially offset by a lower Commercial and International membership.

Capital Position Improves

Cash and short-term investments at the quarter-end were $22 billion, up 42.3% from the 2017-end level.

Debt-to-total capital ratio was 41.6% on Mar 31, 2018, having contracted 190 basis points year over year.

Return on equity increased 210 basis points year over year to 23.8%.

Adjusted cash flows from operations of $3.2 billion rose 5% year over year.

UnitedHealth Group spent $2.65 billion to buy back 11.6 million shares and paid $722 million in dividends, which increased 21% year over year.

Guidance Update

UnitedHealth revised its 2018 financial outlook on the back of solid first-quarter results. It now expects current-year net earnings of $11.70-$11.95 from $11.65-$11.95 per share, estimated earlier. Adjusted net earnings have been raised to $12.40-$12.65 from the previously projected $12.30-$12.60 band. Cash flows from operations are anticipated in the range of $15-$15.5 billion.

Stocks That Warrant a Look

UnitedHealth with a Zacks Rank #4 (Sell) has got this reporting cycle off to a flying start. While the other players in this space are lined up to report financial results, below are three stocks, poised to beat on earnings per the proven Zacks model.

Molina Healthcare, Inc MOH is expected to report first-quarter earnings on Apr 30. The company has an Earnings ESP of +7.43% and a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Humana Inc. HUM has an Earnings ESP of +0.30% and a Zacks Rank #2 (Buy). The company is expected to release first-quarter earnings numbers on May 2.

WellCare Health Plans, Inc. WCG has an Earnings ESP of +0.73% and a Zacks Rank of 2. The company is expected to announce first-quarter financial figures on May 1.

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