UnitedHealth Q2 profit beats expectations amid recovery from tech unit hack
UnitedHealth Group (NYSE: UNH) announced a stronger-than-anticipated second-quarter profit on Tuesday, driven by robust performance in its healthcare services division. The company also revised its cost estimates related to a cybersecurity breach at its technology unit earlier this year.
CEO Andrew Witty highlighted the company’s diversified growth and commitment to providing high-quality, affordable care as key drivers.
However, despite the positive earnings report, the health insurance giant’s stock saw a nearly 3% decline on Tuesday morning.
Investors were concerned about increased costs stemming from cyberattacks during the quarter. UnitedHealth estimated these attacks impacted earnings by 92 cents per share for the quarter and projected up to $2.05 per share for the full year.
In its statement, UnitedHealth Group disclosed that it has successfully restored the majority of the impacted Change Healthcare services.
The cybersecurity incident in February affected the unit, which handles approximately 50% of medical claims processing in the United States, leading to significant disruptions in payments to medical professionals and healthcare facilities.
Why is UnitedHealth stock down on Tuesday?
UnitedHealth expects its per-share earnings to fall between $27.50 and $28.00 on an adjusted basis this year.
Analysts, in comparison, were at $27.59 per share. Andrew Witty – the chief executive of UNH said in a press release today:
“The diversified, durable growth across UnitedHealth stems from our colleagues’ commitment to ensuring high-quality, affordable care is available to people, and positions us well for the near and long term.”
What isn’t sitting well with investors are the higher costs related to the cyberattacks in the company’s recently concluded quarter.
UnitedHealth estimates the impact of those attacks at 92 cents a share for the quarter and up to $2.05 a share for the full year.
Watch here: https://www.youtube.com/embed/vdtjLmR309A?feature=oembedUnitedHealth Q2 earnings snapshot
- Earned $4.42 billion versus the year-ago $5.65 billion
- Per-share earnings declined from $5.82 to $4.54
- Adjusted EPS printed at $6.80 as per the earnings report
- Revenue jumped 6.5% year-over-year to $98.9 billion
- Consensus was $6.67 a share on $98.7 billion in revenue
UnitedHealth is losing this morning also because its medical care ratio worsened some 190 basis points in the second quarter to 85.1%.
On the plus side, however, the company raised its dividend by 12% in June. The health services giant has now increased its annual dividend for fifteen years straight.
What else was noteworthy in UNH’s quarterly release?
UnitedHealth has unloaded its business in Brazil and plans on divesting its remaining operations in South America, as per the press release on Tuesday.
Impact of South American business, it added, was $1.28 a share in the second quarter.
UnitedHealth ended Q2 with $6.7 billion in cash flow from operations – about 1.5 times its net income. Other notable figures in the company’s earnings release today include a 12% increase in Optum revenue to $62.9 billion.
Ahead of UnitedHealth’s quarterly results, analysts at TD Cowen reiterated their “buy” rating on the stock. They see upside in UNH to $546 that suggests potential for close to 10% gain from here.
The investment firm remains bullish as the company’s full-year guidance remains strong and it has a history of maintaining or exceeding its outlook.
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