UnitedHealth 1Q Results Top Estimates; Raises Outlook

UnitedHealth Group reported 1Q results that beat consensus estimates. The health care company posted first-quarter EPS of $5.31 that came in ahead of analysts’ estimates of $4.38. Revenues in 1Q were $70.2 billion, up 9% year-on-year. Analysts were expecting revenues of $69.3 billion.

UnitedHealth Group’s (UNH) CEO, Andrew Witty said, “The unique combined capabilities of Optum and UnitedHealthcare and the unwavering commitment of our people continue to helpadvance the way care is delivered, improving results for those we serve and shareholders.”

The company’s Optum business reported 1Q revenues of $36.4 billion, up 10.8% year-on-year with revenue-per-consumer growing 31% year-on-year. Revenues from Optum made up around 93% of UNH’s total revenues in 1Q. OptumHealth served 99 million people at the end of 1Q compared to 96 million in the same quarter a year ago.

United Health increased its earnings outlook for FY21 and expects it to be in the range of $17.15 to $17.65 per share, with adjusted EPS expected to land between $18.10 and $18.60 per share. The EPS outlook also includes around $1.80 per share “in potential net unfavorable impact to accommodate continuing COVID-19 effects, such as: testing and treatment costs.” (See UnitedHealth stock analysis on TipRanks)

Following the earnings results, Cantor Fitzgerald analyst Steven Halper raised the price target from $375 to $425 and reiterated a Buy on the stock. Halper stated in a note to investors, “Similar to 4Q20, UNH’s results included a significant impact from positive prior period development (PPD). We appreciate the company’s conservatism when it estimates its claims expense. Most of the PPD was related to care deferral activity in 2H20.”

“We maintain our above-consensus estimate at $18.50 [for FY21] noting that consensus of $18.19 will certainly be increasing. With 2021 off to a good start, we maintain our long-held view that UNH should be a core holding in all large-cap growth portfolios, given the company’s diversification, stable growth and healthy free cash flow generation,” Halper added.

The consensus rating among analysts is a Strong Buy based on 10 Buys and 1 Hold. The average analyst price target stands at $415.64 and implies upside potential of 6.6% to current levels.

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