How Will UnitedHealth Perform In Its Second Quarter?

by Trefis Team
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Upside
262
Market
265
Trefis
UNH
UnitedHealth Group
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UnitedHealth Group (NYSE: UNH) has delivered strong results in recent years, with earnings beating market expectations more often than not. The company is scheduled to announce second-quarter earnings on July 17, and we expect it to report another robust quarter, driven mainly by growth in the Medicare & Retirement and OptumHealth businesses. We expect UnitedHealth to report earnings of about $3.08 per share on revenues of $56.6 billion for the quarter, based on our interactive model for UnitedHealth. Moreover, UnitedHealth’s solid growth and favorable outlook have led to stock price appreciation, with the stock up nearly 16% so far in 2018. We maintain a $265 price estimate for the UnitedHealth’s stock, which is ahead of the current market price. Below we take a look at some of the key trends that we will be watching when the company reports earnings.

Medicare & Retirement Business To Continue On Its Upward Trend

UNH’s Medicare & Retirement business includes health coverage and services primarily to individuals aged 50 and over. The business has seen solid results in the past on the back of Medicare Advantage plans. The number of people that the company serves via public and senior plans has been on a strong run for a while now, and we expect this trend to continue in the near term as the population of Medicare beneficiaries is slated to grow in the coming years. Per a report from PWC, Medicare Advantage will cover about 21 million people in 2018, on the back of baby boomers reaching the age of 65. Given the potential for growth, the competition among insurers is heating up, and an important factor that can tip the scale in an insurer’s favor is customer engagement. This is where UnitedHealth’s digital services, call advocates, consumer-centric benefit designs, and nurse coaches stand out. Furthermore, the acquisition of Chile’s Banmedica, and growth in other parts of Latin America should continue to expand the company’s global business horizon.

OptumHealth Services To Boost Optum Business

OptumCare, a health service delivery business, is seeing strong growth and we expect this trend to continue in the upcoming quarter. This will be driven by growth in care delivery, health financial services, and the continued use of analytics that will help the business penetrate into different markets. Meanwhile, the acquisition of DaVita Medical Group should create synergies and help OptumCare expand its portfolio. Net Promoter Score (NPS), a management tool that can be used to gauge customers’ overall satisfaction and loyalty, is about 80 for the business, which exhibits the company’s excellent customer-centric approach. The reason for this success has been solutions such as Rally Care and PreCheck MyScript, which deliver physicians search and drive price transparency, thereby engaging more customers. This has prompted the company to expand the OptumCare business to 75 markets in the future.

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