UnitedHealth Group Inc (NYSE: UNH) stock jumped 2.4 percent Tuesday after the company doubled its profit in the fourth quarter. Earnings were boosted by a one-time tax benefit, but revenue also topped Wall Street expectations.
UnitedHealth, the largest U.S. health insurer, reported fourth-quarter earnings per share of $2.59 on revenue of $52.06 billion. Both numbers topped consensus analyst expectations of $2.51 and $51 billion, respectively.
Total revenue was up 9.5 percent from a year ago, and revenue from the company’s Optum pharmacy benefit management business rose 10 percent to $24.39 billion.
UnitedHealth also raised its 2018 earnings guidance by 16 percent after adjusting for tax cuts. United now anticipates 2018 EPS of $12.30 to $12.60, up from a previous range of $10.55 to $10.85.
A one-time tax benefit of $1.21 per share boosted United’s fourth-quarter EPS. Net earnings attributed to shareholders were $3.65 per share.
“We enter 2018 with both growth momentum and opportunity as a result of our focus on improving the experience of those we serve, combined with actions taken to deepen our capabilities and presence in strategic markets,” UnitedHealth CEO David Wichmann says.
Evercore ISI analyst Michael Newshel says United’s numbers should be well-received by the market.
“We think many investors were worried there could be greater reinvestment and other offsets limiting the tax benefit, and we expect the market to react favorably to the updated guidance,” Newshel says.
Last week, Jefferies analyst David Windley predicted a series of upward guidance revisions from managed care organizations this year. Windley says other companies will likely benefit from the same strong environment that is driving United’s business.
“Growth in government programs, persistent low utilization trends, disciplined pricing and tax reform benefits make MCOs still an attractive sector,” Windley says.
He says leading managed care organizations could get up to a 34 percent 2018 earnings boost from tax reform. He predicts Humana (HUM) will get the biggest tax cut boost this year.
Evercore ISI has…
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