UnitedHealth (UNH) to Report Q2 Earnings: What's in Store?

Zacks Equity Research

UnitedHealth Group Inc.'s UNH second-quarter 2019 earnings are slated to release on Jul 18, before the opening bell. We expect higher consolidated revenues, which will boost the company's earnings.

In the first quarter, UnitedHealth’s earnings of $3.73 per share surpassed the Zacks Consensus Estimate by 3.9% and were up 22.7% year over year. Higher revenues, strength in both segments — UnitedHealthcare and Optum — plus membership growth led to this outperformance.

Factors to Influence Q2 Results

For the company’s UnitedHealthcare segment, revenues are expected to grow on the back of increasing membership in Medicare Advantage and self-funded employees. The Zacks Consensus Estimate for the segment’s premium is pegged at $47.6 billion, translating into year-over-year growth of 6.7%. Improvement in operating cost position should aid the segment’s bottom line.

Earnings of Optum Health, a sub-segment of Omtum, are anticipated to be driven by growth in care delivery, and behavioral, digital consumer engagement and health financial services.

The revenues of another sub-segment, OptumInsight, are expected to be bumped up by an expansion in payer technology and services plus care provider advisory services.

During the quarter, the company completed the acquisition of the primary care unit of DaVita Inc. DVA for $4.9 billion. This deal should be accretive to  UnitedHealth’s second-quarter earnings.

We expect membership rise in Medicare Advantage enrollments, led by more people being served through individual and employer-sponsored group Medicare Advantage plans. Medicare Supplement membership should gain from favorable customer retention and new sales.

Medicaid growth, which suffered in the second half of 2018, should be bolstered by actions taken on both structural costs and rate recovery.

Also, membership in the company’s international markets should grow from business expansion, owing to acquisition of Empresas Banmédica, a leading health care provider and insurer serving Chile, Colombia and Peru, in the first quarter of 2018.

UnitedHealth is expected to incur additional investment and operating costs for accelerating existing initiatives along with artificial intelligence, data analytics, individual health record custodianship, digital health, better net promoter scores and health-related initiatives in local communities.
The company’s profitable results should lead to an enhanced return on equity.

The bottom line is expected to be aided by shares repurchased in the to-be reported quarter.

Earnings Surprise History

The company boasts an attractive earnings surprise history, having surpassed estimates in the trailing four reported quarters, the average being 3.27%. This is depicted in the chart below:

UnitedHealth Group Incorporated Price and EPS Surprise

UnitedHealth Group Incorporated Price and EPS Surprise

UnitedHealth Group Incorporated price-eps-surprise | UnitedHealth Group Incorporated Quote

Here's What Our Quantitative Model Predicts:

Our proven model does not conclusively show that UnitedHealth is likely to beat earnings this season because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to do so. But that is not the case here.

Earnings ESP: UnitedHealth has an Earning ESP of -0.13%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: UnitedHealth carries a Zacks Rank #13, which increases the predictive power of ESP. However, its -0.13% ESP makes surprise prediction difficult.

Stocks That Warrant a Look

Here are some companies worth considering in the healthcare sector as our model shows that these have the right combination of elements to beat estimates this to-be-reported quarter:

Centene Corp. CNC has an Earnings ESP of +0.24% and is a #3 Ranked player. You can see the complete list of today’s Zacks #1 Rank stocks here

Anthem Inc. ANTM has an Earnings ESP of +0.29 and is a #3 Ranked player.

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