UnitedHealth (UNH) kicked off the earnings season for the top-tier managed-care group before Friday’s open, topping estimates while bumping up full-year earnings guidance. UNH stock, a Dow Jones component, rose after the report.
“Customers are responding as we build on our five growth pillars, enabling us to move into the second half of 2022 with strong momentum serving ever more people more deeply” CEO Andrew Witty said in a statement.
UNH stock, Centene (CNC) and Cigna (CI) all are members of the flagship IBD 50 list of leading stocks. Their relative strength has been buoyed as investors have turned defensive, seeking companies whose revenue and earnings can withstand recession.
Results: UnitedHealth earnings rose 18.5% vs. a year earlier to $5.57 per share adjusted, 36 cents ahead of estimates. Revenue grew 12.6% to $80.33 billion, clearing estimates of $79.68 billion.
The medical cost ratio, paid benefits as a share of premiums, fell to 81.5% vs. 82.8% in the year-ago quarter.
UNH added 55,000 Medicare Advantage members and 180,000 Medicaid members, while domestic commercial membership grew 80,000.
The Optum Health services unit continued to help drive earnings growth amid the expansion of its value-based care delivery initiatives, in which pay relates to performance, rather than being paid for each service. Optum Health revenue per consumer served increased 30% over the year ago period.
Outlook: UNH raised full-year earnings guidance to a range of $21.40 to $21.90, up from $21.20 to $21.70. The 20-cent increase is less than the Q2 EPS beat of 36 cents. The analysis consensus had stood at $21.69.
UNH stock rose 1.7% to 511 in early Friday stock market action. On Thursday, UNH stock fell close to its 50-day moving average intraday, but rallied to close up 0.2% to 502.43. That left UNH stock about 3% shy of a 518.80 buy point from a cup-with-handle base. UNH stock flirted with the buy point over the past week but has yet to close above it.
CNC stock rose a fraction. Cigna and Humana (HUM) were not yet active Friday. All three insurers are near buy points.
Managed care stocks have been relatively strong performers this year, as investors look for defensive plays that can weather inflation, higher interest rates and rising recession risk. The policy backdrop also has been favorable, with an 8.5% boost to Medicare Advantage payments set for 2023, the extension of a public health emergency and the lack of headway for disruptive reforms like a public option to compete against commercial insurance.
Still, analysts have been differentiating between the major players based on their varying exposure to Medicare, Medicaid and commercial insurance. That latter is most vulnerable in a recession scenario, a negative for Cigna. Jefferies analyst David Windley wrote this week that Medicare Advantage is the “safest place to hide,” favoring Humana. Medicaid is next safest, informing his upgrade of Centene stock to buy.
UNH and Elevance Health (ELV) “are more diversified and should fare better than CI,” Windley wrote.
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