Will UnitedHealth Earnings Top WellPoint and Humana?

Hopes have been high for UnitedHealth earnings with the onset of Obamacare, but will the reality live up to the hype? Find out here.

Jan 14, 2014 at 6:30PM

UnitedHealth Group (NYSE:UNH) will release its quarterly report on Thursday, and investors have been pleased with the stock's performance over the past year. With the arrival of the Patient Protection and Affordable Care Act, UnitedHealth and peers WellPoint (NYSE:ANTM) and Humana (NYSE:HUM) have had great opportunities to try to make the most of health-care reform, seeking to capture a greater number of insurance customers even as they have to offer different services than they have in the past. The big question is whether UnitedHealth earnings will get more positive impact from serving more customers than negative impact from changes like having to ignore preexisting conditions.

UnitedHealth Group has taken a middle-of-the-road approach toward Obamacare. Rather than follow in the footsteps of WellPoint, which has committed to making its presence felt throughout the nation on Obamacare-provided health insurance exchanges, UnitedHealth has instead held back with only partial participation in certain key markets. That calculated gamble puts UnitedHealth in a better position to deal with any disappointment from the program and to adapt its approach to deal with changing conditions in relation to the Affordable Care Act. Let's take an early look at what's been happening with UnitedHealth Group over the past quarter and what we're likely to see in its report.

Stats on UnitedHealth Group

Analyst EPS Estimate


Change From Year-Ago EPS


Revenue Estimate

$31.07 billion

Change From Year-Ago Revenue


Earnings Beats in Past 4 Quarters


Source: Yahoo! Finance.

What's next for UnitedHealth earnings?
Analysts have gotten more downbeat in recent months about UnitedHealth earnings, cutting their fourth-quarter estimates by $0.03 per share and reducing their full-year 2014 projections by a more substantial $0.23 per share, or about 4%. The stock has largely topped out, remaining mostly flat since mid-October.

UnitedHealth's third-quarter report showed some of the challenges that the health insurance industry is facing right now. A 12% gain in revenue and a rise of 275,000 in its health-network customer count pointed to the success of its operations, especially with its acquisition of Brazil's health insurance giant Amil helping to bolster its international diversification. But earnings rose only 1%, and poor guidance for the full 2013 year led to dissatisfaction about how much of UnitedHealth's revenue is falling to the bottom line. In particular, poor reimbursement rates from Medicare weighed on profits, and with the government intending to keep a lid on those costs, UnitedHealth could well see further trouble ahead. WellPoint doesn't have as many Medicare members as UnitedHealth, but Humana gets nearly three-quarters of its total revenue from Medicare-related products, leaving it especially vulnerable.


Source: TaxFix.co.uk, Flickr.

Yet in dealing with those challenges, UnitedHealth has done a particularly good job. The company has kept its medical loss ratios relatively low, with most recent figures coming in at the low end of the mandated 80% to 85% range under Obamacare. By contrast, WellPoint has been toward the high end of the range. UnitedHealth has also gotten more aggressive in its premium pricing, making sure that higher premiums reflect adverse claim experience and the greater costs involved in providing mandated benefits under the Affordable Care Act.

Still, the big challenge in the long run for UnitedHealth, WellPoint, Humana, and other insurers will be operating costs. UnitedHealth has had to reduce the size of its physician network in order to deal with anticipated Medicare cuts. The impact on health care could be sizable, but membership growth should hopefully give UnitedHealth the leverage it needs to keep its costs under control even as the industry environment gets tougher. Moreover, UnitedHealth's efforts in bolstering its Optum unit, which incorporates health management, pharmacy benefits management, and other specialty services, gives the company a big competitive advantage over Humana and WellPoint as well as greater growth opportunities for the future.

In the UnitedHealth earnings report, watch to see how the company performs in keeping its costs down and its profits up. As more of the Affordable Care Act becomes law, UnitedHealth will need to work even harder to ensure that it remains as successful as it has in the past.

Learn more about how Obamacare is hitting insurer earnings
Obamacare has had a big impact on insurers and patients alike. But in only minutes, you can learn the critical facts you need to know in a special free report called "Everything You Need to Know About Obamacare." This FREE guide contains the key information and money-making advice that every American must know. Please click here to access your free copy.

Click here to add UnitedHealth Group to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.

Fool contributor Dan Caplinger has no position in any stocks mentioned. You can follow him on Twitter @DanCaplinger. The Motley Fool recommends UnitedHealth Group. It recommends and owns shares of WellPoint. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.

Compare Brokers