Image: UnitedHealth Group’s shares have been choppy since the beginning of 2023.
By Brian Nelson, CFA
UnitedHealth Group (UNH) reported messy second quarter results on July 16 that showed a beat on the bottom line, but in-line performance on the top line. The healthcare giant reported revenue of $98.9 billion, up $6 billion from the same period a year ago thanks to “strong expansion in people served domestically at its Optum and UnitedHealthcare” divisions. Second quarter earnings from operations came in at $7.9 billion, which included a $1.1 billion headwind from “unfavorable cyberattack effects.”
Adjusted earnings from operations, which include business disruption impacts but exclude cyberattack direct response costs and the reclassification of its remaining South American operations as held for sale, came in at $8.7 billion, up from $8.1 billion in the year-ago period. Adjusted earnings per share of $6.80 beat the consensus forecast by $0.17. Cash flow from operations came in at $6.7 billion, roughly 1.5x net income.
UnitedHealth Group’s medical care ratio increased to 85.1% in the quarter from 83.2% in last year’s period as pent-up demand for discretionary procedures delayed during the pandemic weighed on results. Also included in its medical care ratio for this quarter were “impacts due to accommodations to support care providers and South American actions,” as well as “revenue effects of CMS’s Medicare funding reductions, medical reserve development effects, and business and member mix.”
UnitedHealth Group reaffirmed its adjusted net earnings outlook in the range of $27.50-$28.00 per share, which it initiated at its November 2023 Investor Conference. The range includes roughly $0.60-$0.70 per share of “business impacts for the affected Change Healthcare services,” up $0.30 per share from its initial estimate that it provided last quarter.
All told, UnitedHealth Group’s second quarter results were quite messy with a lot of moving parts, but cash flow remains resilient and the firm’s dividend growth trajectory remains solid. Back in June, the firm raised its annual dividend rate by 12%, marking the 15th consecutive year that UnitedHealth has increased it at a double-digit pace. UnitedHealth ended the quarter with $75.1 billion in total debt and $77.4 billion in cash and investments. We continue to include UnitedHealth Group as an idea in the Best Ideas Newsletter portfolio.
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Tickerized for UNH, HUM, CI, CVS, ALHC
Brian Nelson owns shares in SPY, SCHG, QQQ, DIA, VOT, RSP, and IWM. Valuentum owns SPY, SCHG, QQQ, VOO, and DIA. Brian Nelson’s household owns shares in HON, DIS, HAS, NKE, DIA, RSP, SCHG, QQQ, and VOO. Some of the other securities written about in this article may be included in Valuentum’s simulated newsletter portfolios. Contact Valuentum for more information about its editorial policies.
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