UnitedHealth Group Inc.
) reported second-quarter 2014 operating earnings of $1.42 per
share, handily beating the Zacks Consensus Estimate of $1.25. This
also compares favorably with the year-ago earnings of $1.40 per
The earnings outperformance was driven by higher revenues but
partly offset by a higher tax rate.
Quarter in Detail
Total revenue of $32.6 billion increased 7.2% year over year. The
revenue figure also surpassed the Zacks Consensus Estimate of $32.0
billion. The year-over-year increase in total revenue was primarily
attributed to an increase in people served in the public and senior
markets at UnitedHealthcare as well as strong growth in the
pharmacy business at Optum.
Total operating cost came in at $30.0 billion, 7.2% higher year
over year due to higher medical operating cost and an increased
cost of product sold. Medical cost which constitutes the major
portion of operating cost also increased 6% year over year to $23.5
UnitedHealth's total medical membership declined 65,000 year over
year to 44.9 million members during the quarter. While the number
of people served grew in the public and senior sectors and
internationally, commercial enrolment declined.
Consolidated operating margin came in at 7.8%, down 10 basis points
from the year-ago quarter.
segment which provides health care benefits, reported revenues of
$30.1 billion, up 6% year over year. The improvement was led by an
increase in the number of people served in public and senior
sector, price increases and higher revenue from federal and
state-based benefit programs.
Earnings from operations remained unchanged at $1.8 billion.
Operating margin of 6.1% declined 30 basis points year over year
due to the effects of the Affordable Care Act.
's revenues of $11.7 billion rose 28% year over year, primarily on
strong contribution from its sub-segment Optum Rx. Earnings from
operations grew 23% year over year to $728 million.
UnitedHealth's balance sheet shows strength, with more than $1
billion of cash available. Debt to total capital ratio at 33.7% as
of Jun 30, 2014, declined 90 basis points year over year.
During the quarter, UnitedHealth Group instituted a 34% hike in its
annual dividend to $1.50 per share. It also renewed the 100 million
share repurchase program.
UnitedHealth upped its revenue guidance to $130.0 billion from its
previous guidance of $128.0 billion to $129.0 billion. Management
also tightened its earning per share forecast to a range of $5.50
to $5.60 per share from $5.40 to $5.60.
UnitedHealth continues to project 2014 cash flows from operations
in the range of $7.8 billion to $8.2 billion.
The quarter's result reflected strong performance by the company,
irrespective of the challenges posed by the Heath Care Reform Act.
Going forward, we expect UnitedHealth to continue delivering
positive surprises as it executes on providing innovative
responsive services to its customers.
UnitedHealth carries a Zacks Rank # 4 (Sell). Better-ranked stocks
Molina Healthcare, Inc.
WellCare Health Plans, Inc.
). While Molina and WellCare sport a Zacks Rank #1 (Strong Buy),
Aetna carries a Zacks Rank # 2 (Buy).
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