UnitedHealth Group Inc. UNH provided initial 2020 adjusted earnings per share (EPS) outlook of $16.25-$16.55 or $15.45-$15.75 on a GAAP basis including intangible amortization. The company also provided initial guidance for revenues of $260-$262 billion and cash flow from operations of $1919.5 billion for 2020.
Shares lost nearly 1% in yesterday’s trading session following the 2020 earnings guidance release, which was a tad lower than the consensus estimates. Notably, the company has a practice of guiding conservatively and then beating its own estimates. It has surpassed estimates in 25 out of last 26 reported quarters and met in one.
Management also expressed confidence in its long-term earnings growth outlook, reiterating its growth target of 1316%. Two-third of this growth will be driven by earnings from operations and one-third from the application of capital.
The company expects membership growth in Medicare Advantage, Medicare Supplement, Medicaid and Global. Membership decline is anticipated in risk-based and fee-based Commercial Employer and Individual plans. Also, Part-D Stand-Alone is likely to see a fall in membership.
For UnitedHealthcare, its main earnings contributor, revenues are expected in the range of $208 billion to $210 billion, and earnings in the range of $11.1-$11.5 billion, with operating margin between 5.3% and 5.5%.
For Optum, the company’s health services business, revenues are expected in the range of $127-$128 billion and operating margin between 8.3% and 8.5%.
The medical care ratio, which suggests the amount to be spent on care as a percentage of premium, is estimated to be 81.5% to 82.2%.
Moreover, UnitedHealth reiterated its expectations for 2019 adjusted EPS in the range of $14.90-$15.
UnitedHealth Group stands apart in the industry by virtue of healthcare services, technology and innovations offered by its unit, Optum. Numerous acquisitions, made by the company, have broadened its business profile, provided benefits of diversification and opened new channels of revenues.
Its solid balance sheet and consistent cash flow generation enable investment in business, which is likely to drive long-term growth. Also, capital management by dividend payout and share buyback is another positive.
UnitedHealth carries a Zacks Rank #3 (Hold).
You can seethe complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Year to date, the stock has gained 11.2%, almost in line with the industry’s growth of 11.7%. It has fared better than other stocks in the same space such as Cigna Corp. CI and Anthem Inc. ANTM, which were up 2.9% and 8.9%, respectively, during the same time frame. Humana Inc. HUM, another health insurer, gained 19.3% year to date.
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