United Health beats analysts’ estimate for profit in the fourth quarter

on Jan 16, 2020
  • United Health Group beats analysts' estimate for quarterly profit in Wednesday's Q4 earnings report.
  • United Health is expecting $16.25 to $16.55 of adjusted earnings per share in fiscal 2020.
  • Analysts recommend the traders to take profits at around $300 level.
  • Revenue from Optum business posted a significant 8% growth.

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The largest U.S health insurer, United Health, announced quarterly performance results on Wednesday. Owing to a broader control on medical costs and improvement in its pharmacy benefits management division, the insurer recorded an upbeat profit in the fourth quarter.

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Following the earnings report, the insurer also highlighted its forecast for 2020 (full-year) that highlighted $16.25 to $16.55 of adjusted earnings per share. In a previous estimate, analysts had expected $16.46 of earnings per share for United Health in fiscal 2020. In premarket trading on Wednesday, United Health was trading 1% lower in the stock market.

Analysts Recommend United Health’s Traders To Take Profits At Around $300 Level

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Analysts branded the United Health’s full-year forecast as conservative as they recommended the traders to grab profits at around $300 level that marks a 40% growth for the stock. With the U.S presidential elections scheduled for late 2020, United Health remained under pressure in the stock market in 2019 amidst the expectations of drastic changes to operational policies before the elections.

The recently rising certainty regarding the government healthcare structure, however, has helped the company regain much of the previous losses. The insurer registered its medical care ratio at 82.5% that came to be marginally worse than last year’s 81.6%. On the revenue front, however, United Health recorded $60.90 billion that marked a 4.3% increase. Analysts, however, had estimated an even better $61.04 billion for the insurer in the fourth quarter.

Selling health insurance plans is the core business for United Health. In this division, the insurer printed $48.25 billion in quarterly sales that saw a hike of 4.4% as compared to the same quarter last year. The company cited a sharply increasing demand for its health plans directed at older people aged 65 and above.

Revenue From Optum Business Grew By 8%

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United Health has recently been focused on improving its Optum business. This division is aimed at providing services related to healthcare data analytics and the management of drug benefits. Optum business also manages the insurer’s acquisitions (small-scale) like the recent purchase of Diplomat Pharmacy for $300 million. Wednesday’s earnings report highlighted Optum to have generated $29.8 billion in revenue in Q4 that marked a significant 8% growth.

As per the analysts’ estimate, the company was to record $3.78 of adjusted earnings per share in the fourth quarter. The performance results, however, noted a modestly higher $3.90 of adjusted EPS in Q4.

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