Q2 2023 Earnings Report of UnitedHealth Group (UNH)

UnitedHealth Group





‘s stock price surged on Friday after the health-care conglomerate announced second-quarter revenue and adjusted earnings that exceeded Wall Street’s expectations, despite the increase in medical costs.

The results alleviated investor concerns following the company’s previous warning about a surge in demand for non-urgent surgeries and outpatient services, which had unsettled the market.

UnitedHealth Group, the largest health-care company in the U.S. based on market cap and revenue, surpasses even the nation’s largest banks in size. Being a bellwether for the broader health insurance sector, its market value reached approximately $447 billion as of Friday afternoon.

Here are the results reported by UnitedHealth Group compared to Wall Street’s expectations, according to a survey of analysts by Refinitiv:

• Earnings per share: $6.14 adjusted vs. $5.99 expected
• Revenue: $92.9 billion vs. $91.01 billion expected

For the quarter, UnitedHealth Group recorded a net income of $5.47 billion, or $5.82 per share. This compares with $5.07 billion, or $5.34 per share, during the same period last year. Adjusted earnings per share for the period were $6.14.

The company reported a total revenue of $92.9 billion for the quarter, representing a 16% increase from the same period a year ago. Note that this figure excludes $33.6 billion in “eliminations,” which are payments made from the company’s UnitedHealthcare division to its other division, Optum. UnitedHealth Group cannot recognize these transactions as revenue because it is essentially paying itself.

UnitedHealthcare, which provides insurance coverage and benefits services to over 50 million individuals, witnessed a 13% increase in second-quarter revenue from a year ago, reaching $70.2 billion.

On the other hand, Optum, the company’s other platform, experienced a nearly 25% revenue increase from a year ago, amounting to $56.3 billion. This growth was partly fueled by UnitedHealth Group’s acquisition of Change Healthcare, a health care technology company, for approximately $8 billion.

Optum offers health services and operates one of the largest pharmacy benefit managers, negotiating drug discounts with manufacturers on behalf of health insurers and large employers.

UnitedHealth Group has raised the lower end of its full-year adjusted earnings outlook to $24.70 to $25.00 per share, up from the previous forecast of $24.50 to $25.00 per share.

The company’s medical cost ratio, which measures the percentage of payout on claims versus premiums, stood at 83.2% for the quarter. Analysts had projected a ratio of 83.3% for the same period, based on FactSet estimates.

Compared to the same period last year, the medical cost ratio has risen by almost 2%. UnitedHealth Care attributed this increase to the previously mentioned rise in elective surgeries and outpatient care activity, primarily among seniors.

During the Goldman Sachs health-care conference last month, UnitedHealth Group CFO John Rex noted the company’s strong outpatient care activity throughout April, May, and early June. The majority of this care came from Medicare enrollees seeking heart procedures, as well as hip and knee replacements, at outpatient clinics.

In recent years, insurance companies have benefited from the postponement of non-urgent procedures due to hospital staff shortages and the COVID-19 pandemic, which resulted in overwhelmed hospitals and a higher risk of exposure. However, UnitedHealth Group executives indicated that this trend may be reversing.