UnitedHealth Group (UNH) beat second-quarter views and raised guidance as the spreading Delta variant of the coronavirus poses new risks as hospitalizations rise. UNH stock rose slightly, nearing a buy point.
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UnitedHealth Earnings
Estimates: Wall Street expects UnitedHealth earnings to decline 38% to $4.43 per share, reflecting tough comparisons in part. Revenue is seen climbing 12% to $69.47 billion, according to FactSet. The company saw a profit windfall in Q2 2020, when earnings nearly doubled as the coronavirus lockdowns led Americans to forgo nonemergency medical care.
Analyst forecast that UnitedHealth’s medical cost ratio, a key metric, is expected to reach 83%. The ratio, also known as medical loss ratio, measures the percentage of premiums that health insurers pay out in medical claims. It’s closely watched as the engine of the managed care industry.
In Q1, United Health’s medical care ratio reached 80.9%, up from 79.1% the prior quarter.
Results: UnitedHealth earnings of $4.70 a share while revenue grew 15% to $71.32 billion. The medical cost ratio was 82.8% vs. 70.2% a year earlier, as Americans avoided seeing the doctor or using their medical benefits during the pandemic.
Outlook: After beating Q2 views by 27 cents, UnitedHealth now sees 2021 EPS of $18.30-$18.60 vs. its April guidance of $18.10-$18.60. Wall Street had forecast UnitedHealth earnings per share of $18.57, FactSet says.
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UNH Stock
Shares of the Dow Jones health giant rose 1.3% to 420.05 in Thursday stock market trading. UNH stock is in a flat base with a 426.10 buy point, according to MarketSmith chart analysis.
The relative strength line for UnitedHealth stock is lackluster and below the consolidation peak. A rising RS line shows a stock is outperforming the S&P 500 index.
The coronavirus pandemic initially lifted UnitedHealth earnings as Americans deferred elective procedures. Now the wind could blow the other way given higher Covid-19 treatment and testing costs, while more people are seeing their doctors again.
The Delta variant is especially of concern. Hospitalizations are rising again, though well below January’s peak, as the more contagious coronavirus strain spreads among the unvaccinated.
Meanwhile, UnitedHealth’s planned purchase of Change Healthcare (CHNG) is under antitrust scrutiny.
Find Aparna Narayanan on Twitter at @IBD_Aparna.
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