UnitedHealth Group Inc. (UNH – Free Report) came up with earnings of $2.59 per share, beating the Zacks Consensus Estimate of $2.50. Earnings also rose 22.7% year over year.
Higher revenues, strength in both its segments, UnitedHealthcare and Optum, and membership growth led to the outperformance.
UnitedHealth has a tradition of guiding conservatively and then beating its own estimates to surprise investors.
The stock gained 3.54% in the pre-market trading session and we expect earnings outperformance to drive the stock higher.
Beneficiary of Tax Reform
The company enjoyed a non-cash benefit of $1.22 per share from the revaluation of its net deferred tax liability, as a result of the recent tax reform.
UnitedHealth Group Incorporated Price, Consensus and EPS Surprise
Behind the Headlines
UnitedHealth recorded revenues of $52.1 billion, which surpassed the Zacks Consensus Estimate of $51.5 billion. Also, it compared favorably with the year-ago number of $47.5 billion.
Total operating cost of $48.1 billion increased 8.4% year over year, due to a surge in medical cost.
Net margin of 6.9% increased from 3.5% in the year-ago quarter.
Strong Performance Across Segments
In the reported quarter, the company’s health benefits segment, UnitedHealthcare, reported revenues of $41.6 billion, up 9.6% year over year. Earnings from operations increased 26% year over year to $1.8 billion.
Revenues from Optum improved 10% year over year to $24.4 billion, reflecting strong contribution from subsegments OptumHealth and OptumInsight as well as OptumRx. Earnings from operations surged 23.8% year over year to $2.2 billion. Continued focus on accelerating growth as well as improving margins and productivity through enhanced integration and business alignment led to the overall improvement of this segment.
Membership Enrollment Surges
The company’s medical enrollment grew 1.9% year over year to 49.5 million, led by growth in members served in the Public and Senior segment, partially offset by lower Commercial and International membership.
