UnitedHealth Group”The share price jumped on Friday after a report from the health care conglomerate second quarter revenue and adjusted profit this surpassed Wall Street expectations despite rising medical costs.
The outcomes eased investor concerns after the Minnesota-based company saw a surge in demand for non-urgent surgeries and outpatient services last month and spooked the market.
UnitedHealth shares closed up greater than 7% on Friday. Nonetheless, this yr the stock has fallen greater than 9%.
UnitedHealth Group is the biggest healthcare company within the US by market capitalization and revenue, and is even larger than the biggest banks within the country. Attributable to its size, UnitedHealth Group is taken into account a frontrunner within the broadly understood medical insurance sector. Its market value at Friday’s close was roughly $447 billion.
Here’s what UnitedHealth Group reported in comparison with Wall Street expectations, based on an analyst survey by Refinitiv:
- Earnings per share: Adjusted $6.14 versus expected $5.99
- Income: USD 92.9 billion in comparison with the expected USD 91.01 billion
UnitedHealth reported net income of $5.47 billion or $5.82 per share for the quarter. It compares with $5.07 billion, or $5.34 per share, over the identical period a yr ago. Excluding certain items, the corporate’s adjusted earnings per share were $6.14 for the period.
The corporate reported total revenue of $92.9 billion for the quarter, up 16% from the identical period a yr ago. That excludes $33.6 billion “qualifiers”, that are payments from the corporate’s UnitedHealthcare division to its other division, Optum. UnitedHealth Group cannot record these transactions as income since it pays itself.
UnitedHealthcare, which provides insurance coverage and services to greater than 50 million people, saw second-quarter revenue increase 13% from a yr ago to $70.2 billion.
The corporate’s second platform, Optum, saw revenue increase nearly 25% year-on-year to $56.3 billion. Optum offers health services and operates considered one of the biggest pharmacy advantages managers, i.e. intermediaries that negotiate drug discounts with drug manufacturers on behalf of health insurers and enormous employers.
Optum’s development was assisted partially by UnitedHealth Group roughly $8 billion acquisition medical technology company Change Healthcare.
This was also driven by a rise of over 900,000 year-over-year within the variety of patients served by Optum’s health services business under value-based care contracts.
UnitedHealth Group raised the lower certain of its full-year adjusted earnings forecast to $24.70 to $25.00 per share, from the previous forecast of $24.50 to $25.00 per share.
The corporate’s medical expense ratio – the share of claims paid in comparison with premiums – was 83.2%. Analysts estimated the speed to be 83.3% for the quarter, in keeping with FactSet.
The medical cost index is sort of 2% higher than in the identical period a yr ago. UnitedHealth Care said this was because of a previously reported increase in planned surgeries and outpatient care, mostly amongst seniors.
“For instance, within the second quarter senior outpatient care activity was several hundred basis points above our expectations,” UnitedHealth Group’s chief financial officer John Rex said during a earnings call.
Rex noted that much of this care comes from seniors who undergo heart surgeries and hip and knee replacements at outpatient clinics, echoing his previous remarks on the Goldman Sachs healthcare conference last month.
UnitedHealth Group expects its medical expense ratio to be “barely lower” within the third quarter in comparison with the second quarter, Rex said in an interview.
He added that the corporate also expects the medical expense ratio within the third quarter to be “barely higher” than within the fourth quarter, noting that that is “only a seasonal factor.”
But overall, the corporate expects “the general pace of care activities to stay consistent,” in keeping with Rex.
Insurance firms have benefited in recent times from delaying non-urgent procedures because of hospital staffing shortages and the pandemic that has flooded hospitals with Covid-19 patients. Hospitals on the time were widely seen as too dangerous to enter elective surgeries.
But UnitedHealth Group executives have indicated that the trend could also be reversing.