UnitedHealth Drops Despite Beat

One of the key factors driving services inflation has been medical costs. And unfortunately for UnitedHealth Group, those higher costs are pressuring its earnings. Let’s take a look at how the company fared after reporting results. 👀

The health insurer reported adjusted earnings per share of $6.16 on sales of $94.4 billion, topping the expected $5.98 and $92.1 billion. Revenue from its managed care business was better than anticipated, but earnings from operations were lighter. Meanwhile, its health services business revenue and earnings both topped expectations.

Another critical metric analysts focus on is its medical loss ratio. This number tracks how much of its premiums were paid out to cover medical expenses and was higher this quarter than analysts estimated at 85% vs. 84.1%. Higher medical costs mean less profit margin for the insurer, and Wall Street fears this is becoming a recurring issue. 😰

Despite this quarter’s challenges, the company reiterated the revenue and earnings guidance it outlined for 2024 last year. Analysts will be closely watching Medicare Advantage utilization trends that are pressuring costs and the financial impact of selling its Brazil operations.

Given healthcare has been such a strong area of the market recently, investors had hoped $UNH shares could successfully break above their 2022 highs. Instead, shares fell about 4% on the news and are moving back toward the middle of a two-year trading range. 📉

We’ll have to wait and see if this giant’s results set the tone for other healthcare companies reporting in the days and weeks ahead. If it does, then that could put a damper on the sector’s rally. 🤷

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