Unitedhealth Group (UNH) Tops Q1 EPS by 1c

Unitedhealth Group (NYSE: UNH) reported Q1 EPS of $1.10, $0.01 better than the analyst estimate of $1.09. Revenue for the quarter came in at $31.7 billion versus the consensus estimate of $32.03 billion.

• First quarter 2014 cash flows from operations of $1.4 billion increased 34 percent year-over-year and were a multiple of 1.3 times net earnings.
• The consolidated medical care ratio decreased 20 basis points year-over-year to 82.5 percent in the first quarter of 2014. The care ratio benefitted 100 basis points in first quarter from billing ACA fees, with this impact expected to increase slightly over the course of 2014 as these tax billings continue. The underlying ACA fees increase operating costs and the income tax rate, as the majority of the fees are not tax deductible. Medical reserves developed favorably by $220 million, compared to $280 million in the first quarter of 2013.
• The first quarter 2014 operating cost ratio of 16.4 percent increased 120 basis points year-over-year, driven by approximately 140 basis points in ACA reinsurance fees and nondeductible health insurance taxes.
• As expected, the first quarter income tax rate of 42 percent increased more than 5 percentage points year-over-year solely due to provisions in the ACA described above.
• First quarter 2014 days sales outstanding of 12 days increased 2 days year-over-year, due to an increase in government receivables. Days claims payable were stable year-over-year at 47 days.
• The Company’s balance sheet remained strong, with cash available for corporate use of $1 billion and the debt to total capital ratio at 34 percent at March 31, 2014, a strengthening of 2 percentage points year-over-year. UnitedHealth Group repurchased $911 million in stock in the first quarter, acquiring more than 12 million shares at an average price of approximately $75 per share, and distributed $276 million in dividends to shareholders, representing dividend growth of 28 percent year-over-year.

“We performed steadily in the first quarter, with continued momentum from our Optum health services platform and year-over-year growth across our UnitedHealthcare health benefits platform offset by headwinds from new ACA taxes and Medicare Advantage funding deficiencies. We continue to help enable a more effective, more modern health care system that better serves consumers and responds to a national imperative to improve the performance of health care and reduce its costs,” said Stephen J. Hemsley, president and chief executive officer of UnitedHealth Group.

UnitedHealth affirms FY2014 EPS of $5.40 - $5.60, versus the consensus of $5.59. Unitedhealth sees FY2014 revenue of $128 - $4129 billion, versus the consensus of $128.94 billion.

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