UPDATE: UnitedHealth Aims For 2012 Growth Amid Challenges
November 28 2011 - 11:00AM
Dow Jones News
Health insurer UnitedHealth Group Inc. (UNH) Monday issued
financial targets for 2012 that indicate expectations for growth
after a strong 2011, but are mostly below Wall Street
expectations.
The Minnetonka, Minn., company, the largest managed-care firm by
revenue, also backed its 2011 earnings outlook ahead of an investor
conference Tuesday. Its shares rose 3.5% to $45.19 in recent
trading and are up about 25% on the year.
Health insurers' earnings have been boosted this year by a
continued trend of muted health-care usage due to economic turmoil.
When patients make fewer visits to doctors' offices and operating
rooms, they rack up fewer bills insurers have to cover. But
UnitedHealth Chief Executive Stephen Hemsley talked on an October
earnings call about a more cautious outlook for the coming year,
when the company will face a number of pressure points, such as a
potential rise to more normal health-care utilization levels plus
investments linked to the health-care overhaul law.
For the new year, the company is forecasting earnings in a range
of $4.55 to $4.75 per share on revenue of $107 billion to $108
billion. Analysts surveyed by Thomson Reuters had forecast, on
average, 2012 earnings of $4.75 on revenue of $108.53 billion.
Although Wall Street is generally aiming higher, analysts still
viewed UnitedHealth's guidance favorably while noting the company's
2011 earnings guidance has risen roughly 25% since it was first set
a year ago. Similarly, analysts have assumed that recently issued
2012 projections from health insurers Humana Inc. (HUM) and Aetna
Inc. (AET) reflected the companies setting low bars with plenty of
room for increases.
"We expect this initial view is conservative, and that the
company can comfortably achieve consensus views of $4.75 and also
our bull case view of $5.00," Sanford Bernstein analyst Ana Gupte
said in a research note.
Meantime, UnitedHealth's new guidance doesn't reflect the
pending acquisition of privately owned Medicare Advantage sponsor
XLHealth, although UnitedHealth has said the deal should add to
per-share earnings next year. XLHealth anticipates it will post
sales above $2 billion next year, so it will also give UnitedHealth
a boost on the top line.
The deal, struck for undisclosed terms, is expected to close in
the first half of 2012.
UnitedHealth said its 2012 outlook also excludes any estimate of
costs to help cover policyholder claims for Penn Treaty, which
UnitedHealth has called an "unaffiliated and potentially insolvent"
long-term care insurer. Pennsylvania law requires insurers to fund
Penn Treaty's obligations.
The company's per-share earnings guidance of $4.52 to $4.57 for
this year is 12 cents above the EPS forecast given in October, but
the difference reflects a new expectation that Penn Treaty-related
costs will be pushed into the new year. Otherwise the 2011 outlook
hasn't changed since the October earnings announcement.
-By Jon Kamp, Dow Jones Newswires; 617-654-6728;
jon.kamp@dowjones.com
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