CVS - UnitedHealth gains amid Q2 beat despite rising costs

2023-07-14 07:04:00 ET

UnitedHealth Group ( NYSE: UNH ) traded ~3% higher pre-market Friday after the managed care company exceeded Wall Street forecasts with its Q2 2023 financials despite signs of rising medical costs.

The Minnetonka, Minnesota-based healthcare giant reported $92.9B in revenue, indicating ~16% YoY growth as its health insurance arm, UnitedHealthcare, added $70.2B to the topline, with ~13% YoY growth reflecting the growth in its customer base.

UnitedHealthcare served 52.8M members at the end of the quarter, exceeding expectations, while the group’s overall customer base stood at 152M as of June 30, 2023.

As the company warned at the Goldman Sachs investor conference in June, rising costs hurt margins. UNH’s net margin dropped to 5.9% from 6.3% a year ago as its medical care ratio and operating cost ratio during Q2 fell short of expectations to stand at 83.2% and 14.9% respectively, compared to 81.5% and 14.6% a year ago.

However, the company’s bottom line exceeded expectations, with adjusted earnings per share of $6.14, $0.16 higher than the consensus.

UnitedHealth ( UNH ) noted that the demand for outpatient care mainly among seniors and changes in business mix led to a higher medical care ratio, which indicates the share of premiums spent on healthcare costs.

"Our diverse health care capabilities and dedicated colleagues are enabling us to meet the needs of more people in more ways, driving substantial growth and expanding our opportunities to serve well into the future," CEO Andrew Witty added.

UnitedHealth’s ( UNH ) Optum business brought $56.3B to the topline with ~25% YoY growth as its subdivisions, Optum Rx and OptumInsight, topped expectations to add $28.6B and $4.7B in revenue, respectively.

Citing strong H1 performance as well as growth and operating prospects, UNH narrowed its full year adj. EPS guidance to $24.70–$25.00 from the $24.50–$25.00 it projected three months ago and $24.70 in the consensus.

As the industry bellwether for the earnings season, UnitedHealth ( UNH ) sets the tone for its managed care peers. Notable stocks to watch include: Humana ( HUM ), Cigna ( CI ), CVS Health ( CVS ), and Alignment Healthcare ( ALHC ).

More on UnitedHealth

• Managed care stock sell-off could be a buying opportunity, says Wells Fargo
• UnitedHealth: Back Up The Truck

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