United Healthcare spurs Dow to best day of the year
AInvestTuesday, Jul 16, 2024 4:26 pm ET
2min read
UNH --

UnitedHealth Group (UNH) reported strong Q2 results despite facing significant challenges from a cyberattack earlier in the year. The company posted adjusted EPS of $6.80, surpassing the consensus estimate of $6.66. Revenue for the quarter came in at $98.86 billion, up 6.4% year-over-year, but slightly below the expected $98.95 billion. The cyberattack on its Change Healthcare unit impacted the quarter's results by $0.92 per share, highlighting the resilience of UNH in managing this crisis.

The news propelled shares of UNH up by 6% during the session, significantly boosting the Dow Jones Industrial Average. As the heaviest weighted stock in the price-weighted Dow, UNH's performance played a key role in today's 1.87% increase in the index, marking its best day in 2024.

The revenue growth was driven by robust performance in both the UnitedHealthcare and Optum segments. UnitedHealthcare, the company's core insurance business, reported revenue of $73.9 billion, which was in line with estimates and up 5.3% year-over-year. Optum, which includes healthcare services and technology, saw its revenue rise by 11.7% to $62.9 billion, slightly exceeding expectations.

The company's medical cost ratio, a key measure of health plan efficiency, increased to 85.1% from 84.4%, indicating higher medical costs. This rise was attributed to accommodations made to care providers and actions in South America. Despite these higher costs, the operating cost ratio improved by 160 basis points to 13.3%, reflecting better cost management.

UNH affirmed its full-year adjusted EPS guidance of $27.50 to $28.00, aligning with analysts' consensus of $27.48. This positive outlook demonstrates confidence in continued growth and recovery post-cyberattack. However, the company's EPS of $4.54, down from $5.82 a year earlier, underscores the impact of increased medical costs and the cyberattack's financial repercussions.

Optum's earnings from operations were $3.9 billion, up 5.4% year-over-year, but below the consensus estimate of $4.3 billion. The operating margin for Optum decreased by 40 basis points to 6.2%, highlighting challenges within this segment. Nevertheless, Optum Health benefited from an expanding customer base under value-based care arrangements, and Optum Rx saw growth from new client additions and its specialty and community-based pharmacy offerings.

The cyberattack on Change Healthcare has had a significant financial impact, costing the company $1.1 billion in the second quarter alone. UNH expects the total impact to rise to $2.3 billion for the year, up from a previous estimate of $1.6 billion. Despite this setback, CEO Andrew Witty expressed confidence in the company's recovery and ongoing improvements in business operations.

In summary, UnitedHealth Group delivered strong Q2 results with notable revenue growth and better-than-expected adjusted EPS, despite the financial strain from a major cyberattack. The company's robust performance in its core and Optum segments, coupled with improved cost management, positions it well for continued growth. Affirming its full-year guidance reflects confidence in overcoming the challenges and capitalizing on future opportunities.

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