UnitedHealth Group reported fourth-quarter earnings that beat analysts’ estimates on Wednesday, as the largest U.S. health care company successfully controlled medical costs and reaped the benefits with Optum, its pharmacy benefits management business.
Still, shares of UnitedHealth dropped 1% before the session ended, following the company’s confirmation of its full-year forecast for 2020 adjusted earnings of $16.25 to $16.55 per share, in contrast to analysts’ estimates of $16.46.
“The dedicated women and men of UnitedHealth Group work together each day to improve outcomes and the patient and physician experience while making health care more affordable, enabling us to serve more people better, while positioning us for continued growth in 2020,” said Chief Executive David Wichmann.
Analysts think the insurer was once again holding back in its forecast at the start of a new fiscal year, urging investors to capitalize on the 40% rise in its stock, which has been approaching record highs of nearly $300 since October.
Rising concerns about radical policy changes in the run-up to the 2020 U.S. presidential elections troubled the company’s stock a lot throughout 2019.
According to the reports, contributions paid out for medical facilities were 82.5%, compared to 81.6% last year. Total revenue climbed nearly 4.3% to $60.90 billion, almost matching the estimates of $61.04 billion.
“There wasn’t any explicit mention of cost trend control in the press release. So you could nitpick on the absence of language there. But I think in general the report is fine,” said Michael Newshel, Wall Street Analyst at Evercore IS.
Selling insurance plans, the company’s main source of income, generated $48.25 billion in sales, 4.4% higher than last year, thanks to higher sales of its insurance plans for people aged 65 years and older.
It has also reinforced Optum, the company’s unit which controls drug benefits and provides healthcare data analytics services. Optum has recently acquired Diplomat Pharmacy for $300 million.
Last month, CEO Wichmann said that Optum will likely cover nearly 50% of the company’s operating earnings this year, two times more than in 2013, making the insurer a “fundamentally different company than the commercial insurance company I joined.”
Optum’s revenue has jumped 8% to $29.8 billion.