UnitedHealth Q3 Earnings Preview: Optum Poised To Drive Growth
UnitedHealth Group (NYSE:UNH) is scheduled to report earnings for the third quarter on Thursday, October 16. [1] In the second quarter, revenues were up 7% year-over-year driven largely by the Optum division. Revenues from Optum grew by nearly 30% during the first half of the year. [2]
On the back of strong results in the previous two quarters, the company raised its revenue guidance for 2014 to $130 billion from a previous forecast of $128 billion. [2] We expect UnitedHealth to continue on its growth trajectory during the second half of 2014 with growth across divisions, especially the Optum business. It will be particularly interesting to see how the company’s efforts to double its presence on health exchanges in around two dozen states pays off. [3]
We have a price estimate of $83 for UnitedHealth’s stock, which is in line with the current market price.
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See Full Analysis For UnitedHealth Group Here
Optum Will Continue To Lead The Way
The Optum division contributes more than 25% of the company’s revenues. The division has been the star performer for UnitedHealth this year, as all three segments within the division saw strong revenue growth. During the second quarter, the company invested close to $80 million in the division to improve analytics, distribution, and customer engagement. [2]
Revenues from pharmacy benefits management unit OptumRx surged by 42% year-over-year in the previous quarter. The company’s retail prescription market share has witnessed solid growth owing to an increase in insurance enrollments. In the second quarter alone, the company filled 140 million prescriptions, a 30% year-over-year growth in volume. [4]
Medicare and Medicaid
The Medicare and Retirement division accounts for about 30% of the company’s revenue. It provides health insurance plans to senior citizens and eligible younger people with disabilities, administered by the Centers for Medicare and Medicaid Services (CMS). Revenue growth during the first two quarters to over $23 billion is in line with our forecast for the division for 2014. We expect the Medicare and Retirement division to generate in excess of $45 billion in revenues this year. However, competition on health exchanges will be a challenge for the company in maintaining its market share.
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More Trefis Research
- Third Quarter Earnings Conference, UnitedHealth Investor Relations [↩]
- CEO Discusses Q2, 2014 Results – Earnings Call Transcript, Seeking Alpha [↩] [↩] [↩]
- UnitedHealth Seeks to Sell Health-Exchange Policies in 24 States, Wall Street Journal [↩]
- SEC 8-K Filing [↩]