UnitedHealth Group's share price soars on improving earnings outlook

UnitedHealth Group (UNH) achieved double-digit growth in its revenue, a higher full-year profit forecast and a lower-than-expected cost increase in its second-quarter earnings. Shares of UNH rose about 7% in early market trading on Friday.

KEY POINTS

UNH posted double-digit growth for the sixth consecutive quarter.
Based on the half-year performance, the company revised its full-year net profit outlook upward to $23.75 per share from $23.45.
Partly due to an increase in surgeries for the elderly, UNH's medical care ratio increased to 83.2% from 81.5% last year .
The stock price rose about 7% at the start of trading.

UNH's revenue grew 16% year-over-year to $92.9 billion. This is the sixth consecutive quarter of double-digit revenue growth. Based on performance in the first half of the fiscal year, the company revised its full-year net profit outlook upward to $23.75 per share from $23.45 per share.

Why is this important?

The largest healthcare company Healthcare in the United States has two business divisions: UnitedHealthcare, which provides healthcare benefits globally, and Optum, which serves businesses in the global healthcare market.

Last month UNH has said its costs were on the rise as older adults opt for more elective surgeries as Covid risks decline. The increase in ambulatory care for the elderly resulted in a medical care ratio – the percentage of health care premiums that goes to patient costs – of 83.2%, compared to 81.5% the year last.

However, these costs were below analysts' expectations and Reuters reported that UNH management expects them to decline further in the next quarter.

UnitedHealthcare's second-quarter revenue increased 13% to $70.2 billion from the same period last year. It was driven by an increase in the number of people served by more than 1.1 million.

Second-quarter Optum revenue was $56.3 billion, a 25% increase over the second quarter of last year. This was partly due to the 33% increase in revenue per customer, while the number of customers grew by more than 900,000 in the Optum Health category.

UnitedHealth Group purchased Amedisys for $3.3 billion in a cash deal last month. After the required approvals, Amedisys will merge Optum.

UnitedHealth Group shares are in down almost 10% since the start of the year, compared to a 4% gain for the Dow Jones Industrial Average.