What happened
Shares of healthcare insurer UnitedHealth Group (UNH 0.30%) were down more than 7% Wednesday afternoon after falling as much as 9.3% earlier in the day. The drop in the stock came after comments by a company executive at a conference. The stock is down more than 14% so far this year.
So what
Speaking at the Goldman Sachs conference in Dana Point, Calif., on Tuesday, Tim Noel, UnitedHealth Group's chief executive for Medicare and retirement, said the company is seeing an uptick in seniors undergoing elective surgeries they had delayed during the pandemic.
That will likely increase costs for health insurers, and UnitedHealth Group's shares weren't the only ones falling on the news as Humana and Cigna Group were down 12% and 4%, respectively, on Wednesday. UnitedHealth's large market cap of $450 billion also meant that the Dow Jones Industrial Average was down Wednesday as well.
Now what
Truist Financial analysts on Wednesday cut their price target for UnitedHealth stock to $580, from $610 previously, but maintained their buy rating. It's important to note the rise in elective surgeries might have a short-term impact on UnitedHealth's bottom line, but in the long term, the company would just raise insurance rates to make up for the difference.
UnitedHealth Group has managed to increase revenue for 10 consecutive quarters and has substantial pricing power as the nation's largest health insurer. In the first quarter, the company reported revenue of $91.9 billion, up 15% year over year, and earnings per share (EPS) of $5.95, up from $5.27 in the same period a year ago.
While increased elective surgeries could be bad for UnitedHealth Group's insurance side, the company also provides care through its Optum division, and its surgery centers were seeing strong volume, chief financial officer John Rex said Tuesday at the conference.
