Will UnitedHealth (UNH) Miss on Earnings Due to Obamacare? - Analyst Blog


U.S. health insurer, UnitedHealth Group Inc. ( UNH ) is scheduled to report its second-quarter 2014 results before the opening bell on Jul 17.

In the last quarter, this health insurer delivered a 0.92% positive earnings surprise. The company delivered a positive earnings surprise over the trailing four quarters, with an average beat of 4.0%.

Will UnitedHealth Group be able to keep its earnings streak alive this quarter?  Let's see what factors might have influenced the earnings report this time around.

Factors Likely to Influence Q2 Results

Earnings in the quarter will be primarily driven higher premium from new Medicaid contracts entered into by the company over the past 12 months.

The company's health service segment branded as Optum will also accrue to the quarter's earnings. Significant revenue contribution is expected from Optum's sub-segments - OptumHealth and OptumInsight - wherein the company has made targeted investments to seek opportunities in areas such as consumer engagement, consumer distribution services, next generation analytics.

However, other factors such as nondeductible insurance taxes, Affordable Care Act prescribed Medicare Advantage funding pull backs and commercial underwriting changes will drag UnitedHealth's second-quarter earnings.  

Earnings Whispers?

Our proven model does not conclusively show that UnitedHealth Group's is likely to beat the Zacks Consensus Estimate in the second quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy) or at least 2 (Buy) or 3 (Hold) for this to happen. But this is not the case here as elaborated below.

Zacks ESP: UnitedHealth Group's Most Accurate estimate is pegged at $1.21 per share, which is below the Zacks Consensus Estimate of $1.25. The Earnings ESP is thus -3.20%.

Zacks Rank: UnitedHealth Group has a Zacks Rank #4 (Sell). We caution against stocks with Zacks Rank #4 and 5 going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Other Stocks to Consider

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:  

Aetna Corp. ( AET ), Earnings ESP of +2.5% and Zacks Rank #2.

Lincoln National Corporation ( LNC ), Earnings ESP of +2.96% and a Zacks Rank #2.

Cigna Corp. ( CI ), Earnings ESP of +2.16% and a Zacks Rank #3.

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AETNA INC-NEW (AET): Free Stock Analysis Report

CIGNA CORP (CI): Free Stock Analysis Report

LINCOLN NATL-IN (LNC): Free Stock Analysis Report

UNITEDHEALTH GP (UNH): Free Stock Analysis Report

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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: AET , CI , LNC , UNH



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