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UnitedHealth's Earnings Plunge Takes Down the Dow

Dan Carroll
October 17, 2013

Although we don't believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes -- just in case they're material to our investing thesis.

Earnings season has struck with a force on the markets today, and the Dow Jones Industrial Average (INDEX: ^DJI) has taken the brunt of its wrath. The Dow's fallen about 50 points as of 2:20 p.m. EDT, part of a dive that started from the opening bell after UnitedHealth Group (NYSE: UNH) posted reasonable earnings that nonetheless couldn't please Wall Street.

UnitedHealth's dropped like a rock to the bottom of the Dow with losses of 5%, and fellow health care giant Merck (NYSE: MRK) isn't having a great day either, losing around 0.2% so far. Let's catch up on the Dow action you need to know.

Wall Street takes down UnitedHealth
UnitedHealth's stock has nosedived despite gaining on both its top and bottom lines during the third quarter. America's largest publicly traded health insurer grew its revenue by a strong 12% for the quarter, outpacing the revenue growth it posted over the first half of the year. Additionally, UnitedHealth managed to boost its income by around 1% and matched Wall Street's projections on EPS. Strong performance in the past has helped the stock rank as one of the Dow's top-five year-to-date performers and a top blue-chip pick since the financial crisis, and UnitedHealth is continuing to keep its growth engine churning.

UNH Chart

UNH data by YCharts

So why's this stock down? UnitedHealth predicted a leaner 2014, saying government funding cutbacks for Medicare Advantage and other government insurance programs will hurt the company's results. UnitedHealth is the largest Medicare Advantage provider in the country, and any larger-than-expected hit to the government's funding -- particularly as Obamacare takes center stage -- could be a big blow to the company's 2014. UnitedHealth projected that next year's earnings could land either above or below this year's results -- a vacuous prediction that unsettled investors.

It's not time to panic despite the stock's big drop, however. UnitedHealth has done a good job diversifying away from reliance on government ins