UnitedHealth Group earnings: Healthy growth

The leader of the U.S. healthcare services and insurance market has had a few difficult quarters behind it. However, the latest results seem to indicate that the company’s fortunes may finally be turning around. Q1 results beat investors’ expectations, and the stock is up nearly 10% in today’s session.

• The company reported revenue of USD 111.7 billion. This represents an approximately 2% year-on-year increase and is above analysts’ expectations of around USD 109 billion.

Where the company truly stood out was profitability and guidance.

• EPS came in as high as USD 7.23 versus expectations of around USD 6.6, representing a 5% increase.
• Full-year EPS guidance was raised from USD 17.75 to USD 18.25, which is well above the Wall Street consensus of about USD 17.8.

Investors are also focusing on the company’s medical cost ratio, a key metric in this business. A decline (optimization) in medical costs translates into improved profitability of the business model. The company managed to bring the medical cost ratio down to 83.9%, a direct improvement in profitability.

Against the backdrop of rising demand for healthcare services in the U.S., the base effect and the impressive improvement in profitability may help the company decisively put a difficult period behind it.

UNH.US (D1)

The stock price has returned to the area near the upper boundary of the consolidation channel. A prerequisite for further gains is a clear breakout above the broad, strong resistance zone between 360 and 380. If that happens, the price may “chase” the rising trendline (orange). Source: xStation5.