UnitedHealth Group Incorporated UNH is set to report its fourth-quarter 2023 results on Jan 12, 2024, before the opening bell.
Where Do the Estimates Stand?
The Zacks Consensus Estimate for fourth-quarter earnings per share of $5.98 suggests a 12% increase from the prior-year figure of $5.34. The consensus mark remained stable over the past week. The consensus estimate for fourth-quarter revenues of $92 billion indicates an 11.1% increase from the year-ago reported figure.
UnitedHealth beat the consensus estimate for earnings in all the prior four quarters, with the average being 2.7%. This is depicted in the graph below:
UnitedHealth Group Incorporated Price and EPS Surprise
UnitedHealth Group Incorporated Price and EPS Surprise
UnitedHealth Group Incorporated price-eps-surprise | UnitedHealth Group Incorporated Quote
Before we get into what to expect for the to-be-reported quarter in detail, it’s worth taking a look at UNH’s previous-quarter performance first.
Q3 Earnings Rewind
The healthcare plan provider reported adjusted earnings of $6.56 per share for the last quarter, beating the Zacks Consensus Estimate by 3.6% on the back of an expanding customer base under UnitedHealth Group’s value-based care arrangements. The solid performance of Optum’s sub-units also contributed to the quarterly results. However, the upside was partly offset by an elevated expense level.
Now, let’s see how things have shaped up before the fourth-quarter earnings announcement.
Q4 Factors to Note
UnitedHealth's fourth-quarter results are estimated to have received a boost from increased premiums, supported by robust growth in its membership base. According to our model, premium revenues for the fourth quarter are expected to have risen by nearly 9% year over year. This growth is primarily attributed to higher premiums generated from both Optum Health and its health benefits businesses.
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UNH's fourth-quarter top-line performance was expected to have been enhanced by a rise in service revenues across the board. Our estimates project an impressive, almost 17% jump in service revenues, while product revenues are expected to have seen nearly 8% year-over-year growth from the year-ago level.
We expect revenues from UnitedHealthcare, UNH’s largest segment that sells insurance, to have increased on higher memberships in selected programs. The Zacks Consensus Estimate for UnitedHealthcare’s total domestic commercial customers signals 2.4% year-over-year growth. Our estimate for segmental revenues indicates more than 8% year-over-year growth. Furthermore, investments and other income are estimated to have witnessed a nearly 55% surge from the year-ago level.
We are looking for higher contributions from each of the sub-segments of the Optum business segment in the fourth quarter. A rise in the number of people being catered to in value-based care arrangements and the growing strength of pharmacy offerings are major tailwinds.
Our estimate for operating income from the Optum business segment suggests a 22% year-over-year increase, while the same from UnitedHealthcare indicates nearly 15% growth. These are expected to have positioned the company for year-over-year growth in the bottom line.
However, rising medical and operating costs are expected to have elevated UnitedHealth’s overall expense level in the quarter. We expect higher costs of products sold to have reduced its margins. Additionally, seniors undergoing elective procedures, which were delayed due to the pandemic, are expected to have accelerated medical costs.
The Zacks Consensus Estimate for UNH’s medical care ratio is pegged at 83.92%, up from 82.80% in the year-ago quarter. Our estimates for medical costs and costs of products sold indicate 9.4% and 17.6% year-over-year increases, respectively. These are expected to have affected its profit growth levels in the fourth quarter, making an earnings beat uncertain.
Earnings Whispers
Our proven model does not conclusively predict an earnings beat for UnitedHealth this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. That is not the case here, as you will see below.
Earnings ESP: The company’s Earnings ESP is +0.54%. This is because the Most Accurate Estimate currently stands at $6.01 per share, higher than the Zacks Consensus Estimate of $5.98.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: UnitedHealth currently carries a Zacks Rank #4 (Sell).
Stocks to Consider
While an earnings beat looks uncertain for UnitedHealth, here are some companies from the broader Medical space that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this time around:
The Cigna Group CI has an Earnings ESP of +1.33% and is a Zacks #2 Ranked player. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Cigna’s earnings per share for the to-be-reported quarter indicates a 31.5% year-over-year jump. CI beat earnings estimates in each of the past four quarters, the average surprise being 2.5%.
Celldex Therapeutics, Inc. CLDX has an Earnings ESP of +30.03% and a Zacks Rank #2.
The Zacks Consensus Estimate for Celldex’s bottom line for the to-be-reported quarter has improved 7.1% in the past 30 days. CLDX beat earnings estimates in two of the past four quarters, met once and missed on the other occasion.
Centene Corporation CNC has an Earnings ESP of +2.47% and is a Zacks #2 Ranked player.
The Zacks Consensus Estimate for Centene’s bottom line for the to-be-reported quarter is pegged at 42 cents per share, which remained stable over the past week. The consensus mark for CNC’s revenues is pegged at more than $36 billion, signaling 1.4% year-over-year growth.
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