UnitedHealth Group (UNH), the nation's largest insurer, reported third-quarter earnings early Tuesday that easily topped Wall Street expectations. A Dow Jones component, UnitedHealth stock soared.
XUnitedHealth Earnings
Estimates: Analysts expected UnitedHealth earnings per share to climb 10% to $3.75 on revenue growth of 5.4% to $59.62 billion, according to Zacks Investment Research.
Results: UnitedHealth earnings rose 14% to $3.88 a share. Revenue climbed 6.7% to $60.35 billion.
Outlook: The Dow Jones stock raised 2019 guidance for adjusted EPS to a range of $14.90-$15.00 vs. prior guidance of $14.70-$14.90, up 15 cents at the midpoint. Before UnitedHealth's 13-cents Q3 beat, analysts expected full-year UnitedHealth earnings per share of $14.84.
On the UnitedHealth earnings call, CEO David Wichmann guided to the lower end of the insurer's 2020 adjusted guidance, saying he wanted to be conservative. But he's bullish on Medicare Advantage programs.
UnitedHealth Stock
Shares soared 8.2% to 238.59 in Tuesday's stock market trading. UnitedHealth stock reclaimed its 50-day line.
UnitedHealth stock has slumped 23% since hitting an all-time high of 287.94 last December. Sentiment shifted not long after Democrats regained control of the House last November, raising the profile of left-wing Medicare for All legislation. Soft revenue guidance for the second half of the year issued in July also undercut the stock, which had been approaching a buy point.
Other health insurers have been struggling. Anthem stock jumped 6%, Centene stock 3% and Humana stock 4.8%. Cigna stock jumped 5.7% and Molina stock 4.3%.
UnitedHealth has a 95 EPS rating from IBD, meaning that its steady earnings growth has topped 95 of all companies. But its poor 24 Relative Strength rating shows the stock has been a laggard.
Jefferies analyst David Windley downgraded UnitedHealth last week and cut his price target from to 235 from 300, saying political clouds hanging over the managed care industry won't begin to part for at least nine months. He also cut price targets for Anthem (ANTM), Centene (CNC), Cigna (CI), Humana (HUM) and Molina (MOH).
Medicare For All
While plans that would wipe out commercial insurance seem very unlikely to pass — even if Democrats take the White House and Senate — a less-disruptive push to allow a Medicare buy-in for those younger than 65 remains within the realm of possibility.
UnitedHealth has about 27 million commercial insurance members out of about 50 million total.
UnitedHealthcare, the company's managed-care division, has seen growth driven by an expansion of its Medicare Advantage. In Q3, Medicare Advantage customers rose nearly 450,000 from a year ago.
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