UnitedHealth hikes profit forecast after big 2Q

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This July 12, 2019, photo shows the UnitedHealthcare headquarters in Minneapolis. UnitedHealthcare Inc. reports earnings Thursday, July 18, 2019. (AP Photo/Jim Mone)

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UnitedHealth raised profit expectations for the year after second-quarter earnings climbed almost 13%, and the nation’s largest health insurer continued expanding beyond its core business and into care delivery.

A nearly 12% jump in revenue from the company’s pharmacy benefit management operation helped UnitedHealth beat Wall Street expectations for the recently completed quarter. UnitedHealth’s OptumRx business added more customers and moved deeper into specialty services like the infusion of drugs at patient homes.

UnitedHealth runs one of the nation’s largest pharmacy benefit managers in OptumRx, which is part of an Optum business segment that also manages physician offices and surgery centers and provides technology support. Total operating earnings from Optum, which is more profitable than the company’s health insurance business, rose 14% to $2.1 billion in the quarter.

Earnings from the still-larger health insurance side also grew 12%, helped by gains from the company’s Medicare and retirement business.

Jefferies analyst David Windley said in a research note that “impressive” control of selling, general and administrative expenses also aided the health insurance side.

Overall, UnitedHealth earned $3.29 billion in the quarter. Earnings adjusted for one-time events totaled $3.60 per share, which is 14 cents better than expected, according to a survey by Zacks Investment Research.

Revenue grew 8% to $60.6 billion, about in line with estimates.

UnitedHealth Group Inc., based in Minnetonka, Minnesota, raised its full year, earnings expectations Thursday to between $14.70 and $14.90 per share from a forecast for $14.50 to $14.75 that it made in April.

Analysts expect full-year earnings of $14.70 per share, according to FactSet.

UnitedHealth’s insurance business covers nearly 50 million people internationally and still brings in most of the company’s revenue. But UnitedHealth also has been feeding Optum with acquisitions as the company adjusts to a big shift in how care is delivered and covered.

Insurers and employers that provide coverage are pushing deeper into managing or providing patient care in order to cut costs and make sure people are getting good care. They’re focusing more on maintaining health, especially for patients with chronic conditions, instead of waiting to pay claims once someone becomes sick.

More than a year ago, UnitedHealth announced a $5 billion deal to buy DaVita Medical Group and its hundreds of clinics. The company finally completed that deal in June, too late to have much of an impact on the quarter.

Shares of UnitedHealth, a component of the Dow Jones Industrial Average, slid 2% to $261.44 late Thursday morning, while the Dow fell slightly.

The stock has had an uncharacteristically bumpy journey this year. It slumped earlier this year amid worries about government scrutiny of drug pricing and Democratic presidential candidate calls for a “Medicare for All” plan that could replace private coverage. But shares rallied this month after President Donald Trump ended a plan to change how rebates for prescription drugs are administered.

With sentiment on managed care companies still cautious, UnitedHealth’s second quarter results should be seen as satisfactory, said Windley, the Jefferies analyst.


Portions of this story were generated by Automated Insights (http://automatedinsights.com/ap) using data from Zacks Investment Research. Access a Zacks stock report on UNH at https://www.zacks.com/ap/UNH

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