UnitedHealth (UNH) raises guidance on strong Q3 growth, revenue up 11%

Highlights

• UnitedHealth Group (NYSE: UNH) declared third-quarter results on Thursday.
  
  
• The group served 146 million people across its businesses as of September 30, 2021.
  
  
• UNH posted revenue of US$72.3 billion and 23.5% return on equity in the third quarter. 

UnitedHealth Group Inc (NYSE: UNH) on Thursday lifted its full-year earnings outlook after strong third-quarter results beat analysts' estimates. 

UnitedHealth revised its full-year net earnings outlook to around US$17.00 and US$17.95 per share and adjusted earnings to around US$18.65 and US$18.90 per share.

The group served 146 million people across its businesses as of September 30, 2021.

UnitedHealth’s third-quarter performance

UnitedHealth’s third-quarter revenue rose by 11% increase YoY to US$72.3 billion from US$65.1 billion in the same quarter of 2020. The earnings from operations were US$5.7 billion against US$4.7 billion in the comparable quarter a year ago.

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UnitedHealth’s net margin improved to 5.6% in the quarter from 4.9% in the year-ago quarter. The adjusted net earnings rose to US$4.52 per share from US$3.51 in Q3 of 2020.

Likewise, the operating margin was 4.7%, while the margin from its franchise, Optum, was 7.7%, bringing the consolidated operating margin to 7.9% in the September quarter. In addition, the consolidated operating margin in the nine months ended September 30 was 9.9%.

UnitedHealth’s cash flow from operation was US$7.6 billion, or 1.8 times the net income for Q3. On a YTD basis, its cash flow from operation was US$19.1 billion.

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Operating costs and dividends

The company’s operating cost ratio was 14.8% compared to 15.6% in Q3 of 2020. The decline was on account of abolished health insurance tax along with continued productivity advances.

The return on equity was 23.5% in the quarter, showing an efficient operating performance. Also, it paid dividends of US$1.4 billion to shareholders, a 16% increase YoY in the annual dividend rate. It also exercised a buyback of 2.5 million shares for US$1.1 million in the quarter.

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The company revised its full-year net earnings outlook in the range of US$17.00 and US$17.95 per share and adjusted earnings to around US$18.65 and US$18.90 per share.

UnitedHealth is one of the largest private health insurance companies in the US. It’s headquartered in Minnetonka, Minnesota.

It offers various services from medical, pharmaceuticals to outpatient care for both affiliated and third-party customers through its Optum franchise and United Healthcare. Its combined headcount in Optum and UnitedHealth is around 340,000 members.

Its current market cap is US$380.5 billion, the P/E ratio is 26.65, and the forward P/E for one year is 21.53. Further, the dividend yield is 1.44%, with an annualized dividend of US$5.80. 

The UNH stock was up 2.71% to US$414.50 in the premarket at 7:57 am ET. 

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Bottomline 

The UNH stock gained around 16% year-to-date, based on its closing price of US$403.55 on Oct 13. The trading volume was 3,022,259. Overall, the healthcare sector has seen strong growth this year, with rapid vaccine developments and FDA approvals for covid vaccines. However, investors should evaluate the companies carefully before investing in the stock market.