UnitedHealth Group Tops Q2 Earnings Estimate (UNH)

Diversified healthcare services provider, UnitedHealth Group Inc. (NYSE: UNH) reported on Thursday that its fiscal second-quarter net income rose 7.4%, aided by higher membership which helped driving up the top line growth.

Shares of UnitedHealth Group rallied as the healthcare management company lifted its lower end of the full-year earnings estimate by 10 cents. The Company now expects earnings to be in the range of $5.35 to $5.50 a share. UnitedHealth Group also reaffirmed its full year revenue guidance.

As UnitedHealth is the nation’s biggest managed care company in terms of revenue, it quarterly results, which are released very early, serves as bellwether for the industry, providing decent idea over health cost and patient traffic trends. During economic crises of 2008/09, health insurers were able to retain a greater part of premiums as fewer customers went to hospitals and doctors.

The Company, however, has warned that the proposed cuts in federal spending on Medicare and Medicaid (healthcare reforms) will hurt its revenue.

In order to lower the impact of federal spending cuts, the company is expanding its geographical presence. The Company recently acquired 90% stake in Brazil’s biggest managed care company, Amil Participacoes in deal valued at $4.3 billion.

For the fiscal second quarter, the Minnetonka, Minnesota-based company reported net income of $1.44 billion or $1.40 a share compared to a profit of $1.34 billion or $1.27 a share, in the same quarter of last year.

Revenue rose 12% to $30.41 billion.

Analysts’ consensus estimate was for earnings of $1.25 a share on revenue of $30.49 billion, according to a data compiled by Thomson Reuters.

Operating margin contracted to 7.9% from 8.2%, in the year earlier.

While revenue from UnitedHealth’s insurance business rose 11% to $28.33 billion, revenue from Optum division jumped 21% to $8.84 billion.

The medical care ratio, which shows what part of insurance premium collected was used for patients’ care, rose to 81.5% from 81.3%, in the same quarter of last year.