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UnitedHealth beats first-quarter profit view, raises 2019 forecast

Stock MarketsApr 16, 2019 09:22AM ET
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© Reuters. FILE PHOTO: Traders work at the post where UnitedHealth Group is traded on the floor of the NYSE in New York

(Reuters) - UnitedHealth Group Inc (NYSE:UNH) on Tuesday reported a quarterly profit above estimates and raised its 2019 earnings forecast on increased prescription volumes at its pharmacy benefits unit, sending shares of the largest U.S. health insurer up 3 percent.

The results eased some pressure on the health insurance sector where stocks have taken a beating in the past few weeks over policy-related uncertainty. Shares of rivals Anthem (NYSE:ANTM) Inc, Centene (NYSE:CNC) Corp, Humana Inc (NYSE:HUM) and Cigna Corp (NYSE:CI) were also up in light trading.

The uncertainty has largely resulted from proposals to change the drug-rebate system under which drugmakers refund money to insurers and pharmacy benefit managers.

Analysts said the industry bellwether's quarterly results reinforce that underlying fundamentals for the sector remain fully on track, despite the recent slump in share prices.

Optum, UnitedHealth's fastest-growing unit which houses its pharmacy benefits business, brought in sales of $26.36 billion in the quarter, a jump of nearly 12 percent from a year earlier due to higher prescription volumes.

UnitedHealth on Tuesday also raised its full-year adjusted earnings forecast to between $14.50 and $14.75 per share from its prior view of $14.40 to $14.70.

"We find this notable, as UnitedHealth has historically been conservative in adjusting guidance early in the year," Cantor Fitzgerald analyst Steven Halper said.

Last year, rivals Cigna Corp and Aetna (NYSE:AET) combined with Optum's two largest rivals, Express Scripts (NASDAQ:ESRX) Holding and CVS Health Corp (NYSE:CVS).

In its health insurance business, UnitedHealth's medical care ratio, which compares premiums with the cost of delivering medical care, worsened to 82 percent, from 81.4 percent last year, on deferral of the health insurance tax, the company said. Analysts on average were expecting 82.2 percent.

In the quarter ended March 31, net earnings rose 22.2 percent to $3.47 billion, or $3.56 per share.

The company reported adjusted earnings of $3.73 per share, beating estimates of $3.60 per share, according to IBES data from Refinitiv.

Total revenue rose 9.3 percent to $60.31 billion, ahead of estimates of $59.71 billion.

Evercore ISI analyst Michael Newshel said UnitedHealth continues to deliver consistent performance and fundamentals still look good.

"But now the question is whether any rebound in the shares can be sustained amid the political overhang that has plagued the managed care group."

UnitedHealth's shares were up 2.66 percent at $236.32 in pre-market trading. As of Monday's close, the stock is down nearly 8 percent in 2019.

UnitedHealth beats first-quarter profit view, raises 2019 forecast
 

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