Source: Department of Health and Human Services.

On Thursday, UnitedHealth Group (NYSE:UNH) will release its quarterly report, and shareholders are of two minds about the health insurer's recent results. On one hand, the stock has pushed ahead to all-time highs. But increasingly, pressure from WellPoint (NYSE:ANTM), Humana (NYSE:HUM), and other major players in the health-insurance arena is taking its toll on UnitedHealth's profitability, and the fallout from the Affordable Care Act remains a concern for investors going forward.

UnitedHealth Group has been a leader in the health insurance industry for years, with a wide-ranging business that has grown to international scope. Yet more recently, UnitedHealth has failed to show the same promise that WellPoint, Humana, and other competitors have shown, as the rise of Obamacare seems to have leveled the playing field somewhat for industry participants. Investors now want to know how UnitedHealth will reassert its dominance in health insurance. 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

$32.01 billion

Change From Year-Ago Revenue


Earnings Beats in Past 4 Quarters


Source: Yahoo! Finance.

Can UnitedHealth earnings bounce back?
In recent months, investors have grown less enthusiastic about UnitedHealth earnings, cutting their second-quarter estimates by $0.07 per share or about 5%. The stock has kept rising higher, though, with gains of 4% since early April.

UnitedHealth Group's first-quarter results showed the tug-of-war that the health insurance industry is going through right now. The implementation of Obamacare helped send UnitedHealth's Medicaid business soaring, with a 5% jump in overall sales due largely to the Medicaid segment. But a big gain in membership due to a contract from the Tricare program for U.S. military servicemembers was partially offset by a drop of 780,000 members on the commercial side of its business, and net margins were hit by more than a percentage point because of health-care reform, helping to pull earnings down from year-ago levels.

Source: UnitedHealth Group.

To maximize its profit, UnitedHealth has to balance two very different parts of its business. On one hand, areas like its Optum pharmacy benefits and health-care services business have performed extremely well lately, with big jumps in revenue as clients seek more advice on how to keep their health-care costs down and promote wellness and other initiatives that both improve health and reduce expenses. At the same time, though, UnitedHealth and peers WellPoint and Humana rely to a large extent on government programs, and pricing pressure to cut reimbursement rates from Medicare inevitably weigh on profits.

Yet on the execution front, UnitedHealth hasn't performed as well as some of its peers. Increased spending on hepatitis C drug Sovaldi had a substantial impact on earnings, catching UnitedHealth by surprise. By contrast, WellPoint seemed better prepared for hep-C drug spending, giving UnitedHealth insight into an area where it could improve on its track record.

Nevertheless, UnitedHealth has positioned itself for long-term success. Expansion into Brazil has gone well, providing revenue that's independent of U.S. health-care trends. Moreover, now that some of Obamacare's kinks have worked themselves out, UnitedHealth plans to boost its exposure to public health-insurance exchanges in the next year. With efforts to keep its provider network efficient, UnitedHealth also hopes to qualify for bonus payments from the government for its Medicare Advantage programs.

In the UnitedHealth earnings report, watch to see whether the company foresees an end to its earnings headwinds. With so much opportunity from favorable demographics and health-care trends, UnitedHealth can't afford to let WellPoint, Humana, and other players in the insurance industry eat away at its leadership position.

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