UnitedHealth Beats Estimates - Analyst Blog
April 21 2011 - 11:09AM
Zacks
UnitedHealth Group (UNH) reported first quarter
2011 net earnings of $1.22 per share, well ahead of the Zacks
Consensus Estimate of 89 cents.
Earnings also compare favorably with $1.03
per share reported in the prior-year quarter. Net earnings
increased 13% year over year to $1.3 billion in the
quarter.
Results were
aided by strong revenue growth from UnitedHealthcare as well as
from Optum businesses.
Operational
Update
UnitedHealth
reported revenue of $25.43 billion in the quarter, increasing 9.7%
year over year. Results also surpassed the Zacks Consensus Estimate
of $24.96 billion. The increase in revenues was brought
primarily by a double-digit surge in revenues at UnitedHealthcare
Community & State, OptumHealth and OptumInsight.
Operating
costs increased 10% year over year to $3.6 billion. The medical
cost ratio came in at 81.4%, increasing 10 basis points year over
year.
Operating
income totaled $2.2 billion, up 10% year over year.
UnitedHealthcare
revenues
increased 9% year over year to $23.87 billion in the first quarter
2011. The improvement was due to increase in the number of members
served.
Operating
earnings improved 12% year over year to $1.9 billion with operating
margin expanding 30 basis points to 8% benefiting from cost
containment measures.
OptumHealth reported revenues of $1.5 billion,
increasing 37% year over year driven by expansion in clinical
services and strong consumer growth in population health management
products sold to payers and plan sponsors.
Operating earnings of $109 million represented a 24%
year-over-year decrease. This earnings decrease was driven by a
margin decline of 60 bps to 7.2%, which reflected costs related to
the implementation of Mental Health Parity legislation, internal
business realignments and revisions to service arrangements and
continued investments in new market development and growth.
Optuminsight (formerly
Ingenix) reported revenues of $671 million, which
increased 33% year over year, primarily driven by organic growth
and contributions from recent acquisitions.
Operating earnings in the quarter increased a whopping 57% year
over year to $83 million. Operating margin improved
by 190 basis
points to 12.4%, reflecting an increased level of higher margin
product and solution sales and favorable first quarter operating
costs.
OptumRx (formerly
Prescription Solutions) reported revenue growth of
13% year over year to gross $4.6 billion, driven by growth in
people served and prescription volumes.
Operating
earnings at OptumRx remained flat year over year at $130 million.
Higher revenues were offset by costs to support growth
initiatives.
Financial
Update
UnitedHealth
ended the first quarter with cash and short-term Investments of
$12.2 billion, up 8.5% form 2010 end.
Long term
debt increased 8% from the 2010 level to total $9.4 billion at
quarter end.
Operating
cash flows in the quarter under review totaled $1.2 billion, up
1.6% year over year. Capital expenditure increased a considerable
61% year over year to $213 million in the first quarter of
2011.
Share
Repurchase
In the first quarter of 2011, UnitedHealth spent $620 million to
buy back 15 million shares.
2011 Guidance
UnitedHealth expects revenues to be approximately $101
billion.
UnitedHealthcare revenue is projected between $94 billion to
$94.5 billion; OptumHealth revenue is projected between $6.2
billion to $6.4 billion; OptumInsight revenue is seen at $2.5
billion to $2.7 billion; and OptumRx revenue is expected at about
$18.6 billion to $19.0 billion.
UnitedHealth projects operating earnings to be in the range of
$7.2 billion to $7.5 billion.
The company also guided net earnings in the range of $3.95 to
$4.05 per share. Cash flow from operations is estimated to be $5.8
billion to $6.2 billion.
UnitedHealth expects to spend $2 billion to $2.5 billion in
repurchasing
shares.
Our
Take
UnitedHealth
remains well positioned with strong performances across its
businesses with continuous investments to develop its product
offerings. The company continues to enhance shareholders' value
through dividend payment and share repurchases. Also, UnitedHealth
Group remains focused on catering to the growing market demand to
provide quality care at affordable prices.
We maintain
a “Neutral” recommendation on UnitedHealth Group over the long
term. The quantitative Zacks #3 Rank (short-term ''Hold' rating)
indicates no clear directional pressure on the stock over the near
term.
Headquartered in Minnesota,
UnitedHealth Group Inc., through its diversified businesses,
leverages core competencies in advanced technology-based
transactional capabilities, health care data, knowledge and
information, and health care resource organization and care
facilitation to improve access to health and well-being services,
simplify the medical experience, promote quality and make health
care more affordable. It competes with Aetna
Inc. (AET) and WellPoint Inc. (WLP).
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