UnitedHealth Group Inc. Earnings: Can They Grow Despite Obamacare?

Investors have been enthusiastic about UnitedHealth's prospects, but will the health-insurance giant deliver?

Apr 15, 2014 at 2:30PM

On Thursday, UnitedHealth Group (NYSE:UNH) will release its quarterly report, and investors have anticipated solid results from the health-insurance company by bidding its share to new all-time highs in recent weeks. Yet even as UnitedHealth and rivals WellPoint (NYSE:ANTM) and Humana (NYSE:HUM) have struggled to deal with and incorporate the health-care reforms under Obamacare into their respective business models, UnitedHealth hopes to find new avenues for growth in areas that WellPoint and Humana have largely left untapped.

Investors have been nervous about the impact of Obamacare on health-insurance companies for years, figuring that the requirement that UnitedHealth Group and its peers accept patients with pre-existing conditions would require a massive hit to earnings. Now that the individual mandate has taken effect, the question for UnitedHealth is whether greater numbers of enrollees will make up for the negative impact of higher losses from those who used to be relegated to high-risk pools and other backwaters of the insurance industry. 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.

Source: TaxFix.co.uk, Flickr.

Stats on UnitedHealth Group

Analyst EPS Estimate


Change From Year-Ago EPS


Revenue Estimate

$32.03 billion

Change From Year-Ago Revenue


Earnings Beats in Past 4 Quarters


Source: Yahoo! Finance.

Which way will UnitedHealth Group earnings move?
In recent months, analysts have had negative views on UnitedHealth earnings, cutting their first-quarter estimates by a dime per share and making similar reductions to their 2015 full-year projections. The stock, though, has done well, rising 4% since early January.

UnitedHealth Group's fourth-quarter earnings report showed the tale of two businesses that are driving the health-insurance giant's results. Overall, UnitedHealth's revenue rose 8% on membership growth of 170,000 people, and net earnings jumped 18% from the year-ago quarter. Although its traditional insurance business did reasonably well, UnitedHealth Group's biggest growth came from its Optum health-care services division, which enjoyed a 35% gain in sales that came largely from a boost in pharmacy-services revenue.

Yet Obamacare has been a wildcard for UnitedHealth Group and the entire health-insurance industry. WellPoint took an aggressive stance on health-care insurance exchanges, while UnitedHealth Group and some of its peers were more conservative about waiting to see how the exchanges played out. Now that the individual mandate has taken effect, analysts are still uncertain whether the actual mix of new enrollees under Obamacare will lead to greater profits or greater losses for UnitedHealth and other insurance companies. Some demographic studies have found that a relatively small number of Obamacare participants actually lacked insurance coverage prior to enrolling, with gains in employer-sponsored insurance and Medicaid enrollment being offset by millions of previously insured Americans losing their previous coverage.

Another big challenge for UnitedHealth Group could come from Medicare Advantage, where reimbursement rates are under constant threat. Still, UnitedHealth has maintained a relatively modest exposure to Medicare Advantage compared to Humana, which gets more than two-thirds of its earnings from the government program. Moreover, favorable indications that reimbursement rates for Medicare Advantage might not drop as much as had originally been feared led to a brief pop for UnitedHealth and Humana in late February, proving that volatility related to government-program revenue can work both ways.

Still, UnitedHealth Group is seeking to maximize all of its growth opportunities. Its pharmacy benefit management business handles $30 billion in operations, and UnitedHealth's decision in 2011 to bring that business in-house has opened the door to potentially huge profit growth. At the same time, UnitedHealth Group's foray oversees to buy Brazilian insurer Amil two years ago gives UnitedHealth some diversification from the risks involved in its U.S. operations.

In the UnitedHealth Group earnings report, watch to see how Obamacare affects the health insurer's first-quarter results. With full implementation just now taking effect, it'll be interesting to see whether the long-anticipated benefits to Obamacare outweigh the costs that UnitedHealth Group has to bear under the program.

3 stocks poised to be multi-baggers
The one sure way to get wealthy is to invest in a groundbreaking company that goes on to dominate a multibillion-dollar industry. Our analysts have found multi-bagger stocks time and again. And now they think they've done it again with three stock picks that they believe could generate the same type of phenomenal returns. They've revealed these picks in a new free report that you can download instantly by clicking here now.

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

Dan Caplinger has no position in any stocks mentioned. The Motley Fool recommends UnitedHealth Group and WellPoint. The Motley Fool 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.

A Financial Plan on an Index Card

Keeping it simple.

Aug 7, 2015 at 11:26AM

Two years ago, University of Chicago professor Harold Pollack wrote his entire financial plan on an index card.

It blew up. People loved the idea. Financial advice is often intentionally complicated. Obscurity lets advisors charge higher fees. But the most important parts are painfully simple. Here's how Pollack put it:

The card came out of chat I had regarding what I view as the financial industry's basic dilemma: The best investment advice fits on an index card. A commenter asked for the actual index card. Although I was originally speaking in metaphor, I grabbed a pen and one of my daughter's note cards, scribbled this out in maybe three minutes, snapped a picture with my iPhone, and the rest was history.

More advisors and investors caught onto the idea and started writing their own financial plans on a single index card.

I love the exercise, because it makes you think about what's important and forces you to be succinct.

So, here's my index-card financial plan:


Everything else is details. 

Something big just happened

I don't know about you, but I always pay attention when one of the best growth investors in the world gives me a stock tip. Motley Fool co-founder David Gardner (whose growth-stock newsletter was rated #1 in the world by The Wall Street Journal)* and his brother, Motley Fool CEO Tom Gardner, just revealed two brand new stock recommendations moments ago. Together, they've tripled the stock market's return over 12+ years. And while timing isn't everything, the history of Tom and David's stock picks shows that it pays to get in early on their ideas.

Click here to be among the first people to hear about David and Tom's newest stock recommendations.

*"Look Who's on Top Now" appeared in The Wall Street Journal which references Hulbert's rankings of the best performing stock picking newsletters over a 5-year period from 2008-2013.

Compare Brokers