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Here's Why Investors Liked UnitedHealth Group's Q1 Results

By Keith Speights - Apr 16, 2021 at 6:05AM

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The health insurer delivered solid top- and bottom-line growth.

UnitedHealth Group (UNH 0.40%) weathered the COVID-19 pandemic pretty well in 2020. Shares of the health-insurance giant jumped 19%, topping the performance of the S&P 500 index. And UnitedHealth appears to be doing just fine so far this year, as well.

The company announced its first-quarter results before the market opened on Thursday. The health-insurance stock rose nearly 4% on the news. Here are the highlights from UnitedHealth Group's Q1 update.

Doctor looking at tablet with healthcare icons in the foreground

Image source: Getty Images.

By the numbers

UnitedHealth Group reported revenue of $70.2 billion in the first quarter, a 9% increase from the $64.4 billion reported in the same quarter of the previous year. This result beat the average analyst revenue estimate of $69.2 billion.

The company announced net income in the first quarter of $4.9 billion, or $5.08 per share, based on generally accepted accounting principles (GAAP). In the prior-year period, it generated GAAP earnings of $3.4 billion, or $3.52 per share.

UnitedHealth posted adjusted net income in the first quarter of $5.31 per share. This reflected a big jump from adjusted earnings of $3.72 per share in the prior-year period. It also blew past the consensus analyst estimate of $4.38 per share.

Behind the numbers

The company's UnitedHealthcare health-insurance business generated Q1 revenue of $55.1 billion, up 7.9% year over year. Although costs related to COVID-19 treatment and testing were higher than expected in the first quarter, more individuals also deferred elective care. The medical-care ratio (the ratio of total medical expenses to total premiums paid) declined slightly to 80.9% in Q1 from 81% in the prior-year period.

UnitedHealthcare's membership increased by more than 1 million during the first quarter. This was due, in large part, to strong individual Medicare Advantage membership growth. The segment also saw sustained growth with its specialty products such as dental and vision insurance.

The company's Optum division's Q1 revenue jumped 10.8% year over year to $36.4 billion. OptumHealth delivered an especially strong performance with revenue per consumer soaring 31% year over year. Technology services provider OptumInsight saw its revenue backlog grow by $1.6 billion in Q1 to $20.8 billion.

The weakest link for UnitedHealth Group in the first quarter was its OptumRx pharmacy benefits management (PBM) business. OptumRx's revenue increased slightly year over year to $21.6 billion. Its adjusted scripts slipped to 329 million in the first quarter from 339 million in the prior-year period. These levels were lower primarily due to care-deferral patterns. 

Looking ahead

UnitedHealth Group increased its full-year earnings guidance. The company now anticipates full-year net earnings of $17.15 to $17.65 per share, compared to its prior outlook of $16.90 to $17.40 per share. It projects adjusted earnings per share will be between $18.10 and $18.60, up from the previous guidance of $17.75 to $18.25.

Perhaps the biggest wild card for UnitedHealth is what happens with COVID-19. The company's full-year guidance included around $1.80 per share in negative impacts from COVID-19 testing and treatment, care deferred in 2020 being delivered this year, and economic effects of the pandemic, such as unemployment.

However, UnitedHealth Group still appears to be a solid stock that deserves a place in many investors' portfolios. With the increased availability of COVID-19 vaccines and the prospects of Medicaid and Medicare expansion, the health-insurance leader's future looks bright.

Keith Speights has no position in any of the stocks mentioned. The Motley Fool recommends UnitedHealth Group. The Motley Fool has a disclosure policy.

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