UnitedHealth Group topped second-quarter earnings forecasts and kept full-year guidance intact, despite increasing the estimated hit from cyberattack of its Change Healthcare unit. UNH stock initially dipped but turned solidly higher in Tuesday stock market action, after tilting higher Monday on growing conviction former President Donald Trump will win a second term after surviving an assassination attempt on Saturday.
Jefferies analyst David Windley wrote in a morning note that a favorable tax rate "saved the EPS streak. He also noted that medical costs ran higher than expected.
UnitedHealth Earnings
Estimates: Analysts expected UnitedHealth Q2 EPS of $6.66, up 8.5% from a year ago. Revenue was seen rising 6.3% to $98.73 billion, according to the FactSet consensus. Forecasts for the medical cost ratio, or spending on medical care as a percentage of premiums, called for a rise to 84.5% from 83.2% a year ago amid higher utilization of care by Medicare Advantage members.
Results: Adjusted EPS rose 10.75% to $6.80 a share. Revenue grew 6.4% to $98.855 billion. The medical cost ratio came in at 85.1%, however 65 basis points reflected additional costs absorbed to help providers facing disruption due to the Change Healthcare cyberattack.
A favorable tax rate added 24 cents to EPS, Windley said.
Windley also wrote that the 84.5% consensus estimate for the medical cost ratio baked-in the Change Healthcare impact. Analysts were looking for an underlying medical cost ratio of 84.1% — below the 84.5% reported figure.
Outlook: UNH affirmed its prior outlook for full-year EPS of $27.50 to $28. The outlook factors in total Change Healthcare costs of $1.90 to $2.05 a share, which management increased by 70 to 75 cents from April's view.
Trump Effect On Health Care
UNH, Humana and most other managed care stocks rallied Monday as Trump's odds of winning another four-year term jumped in the wake of the assassination attempt.
On June 28, a day after President Biden froze up during the first debate, RBC Capital said the Medicare Advantage regulations would ease under Trump. The analysts also expect relaxation of Department of Justice scrutiny on the vertical integration between UNH's UnitedHealthcare managed-care division and its Optum health services arm.
Meanwhile, Republican control of Congress and the White House would likely mean less support for Medicaid. The same its true for buying family and individual coverage on Healthcare.gov and the state insurance exchanges. The first Trump administration tried to dismantle the Affordable Care Act. That could have meant a surge in the ranks of the uninsured. That's why hospital operators, including HCA Healthcare, and managed-care firms with a Medicaid focus have come under pressure as Trump's election prospectshave blossomed.
UNH, HUM, HCA, CNC
UNH, a Dow Jones member, rose 2.5% in early Tuesday stock market action, after climbing 0.75% on Monday.
On Monday, Medicare Advantage leader HUM rose 0.5%. Centene, which has significant exposure to both Medicaid managed care and the health insurance exchanges, fell 2.7% on Monday.
In addition, HCA fell 2.3% on Monday, but has tumbled about 8% since Trump's election prospects began to surge following the June 27 debate.
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