UnitedHealth Lifts Low-End of EPS Forecast After Solid Earnings

UnitedHealth Group Inc. (NYSE: UNH) reported second-quarter 2016 results before markets opened Tuesday. The health insurance and benefits management firm posted adjusted diluted earnings per share (EPS) of $1.96 on revenues of $46.5 billion. In the same period a year ago, UnitedHealth reported EPS of $1.73 on revenues of $36.26 billion. Second-quarter results also compare to the consensus estimates for EPS of $1.89 on revenues of $45.05 billion.

Total enrollment numbers increased year-over-year from 45.86 million to 47.98 million. Commercial enrollments rose from 29.4 million to 30.49 million. Medicare and Medicaid enrollment rose from 12.38 million to 13.44 million, and international enrollment slipped from 4.08 million to 4.05 million.

The consolidated medical care ratio rose by 0.3% to 82% for the quarter, and it included more than 50 basis points or approximately $200 million of additional full-year losses from ACA-compliant individual products above previous projections and fully absorbed within second quarter results.

The company narrowed its EPS range from a prior outlook of $7.75 to $7.95 to a new range of $7.80 to $7.95.

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UnitedHealth repurchased $980 million worth of its common stock in the second quarter and raised its annual dividend payment by 26% to $2.50 per share.

In the company’s UnitedHealthcare insurance business, revenues grew by $1.7 billion year over year in the quarter. Profits were down 4% year over year and operating margin fell from 6.1% to 5.2%, primarily due to the ACA-related loss.

The Optum health services business posted second-quarter revenues of $20.6 billion, up 52% year over year. Earnings from operations improved by 46%. The company attributed the increases to strong growth in pharmacy care services. Operating margin decreased by 30 basis points year over year to 6.1%.

Shares closed down about 0.4% on Monday, at $40.75 in a 52-week range of $95.00 to $142.96. The stock price was unchanged in Tuesday’s premarket session. Thomson Reuters had a consensus analyst price target of $152.05 before results were announced.

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