UnitedHealth Group (UNH) Tops Q2 EPS by $1.94, Revenues Miss; Maintains FY20 EPS Mid-Point Guidance Above Consensus

UnitedHealth Group (NYSE: UNH) reported Q2 EPS of $7.12, $1.94 better than the analyst estimate of $5.18. Revenue for the quarter came in at $62.1 billion versus the consensus estimate of $63.43 billion.

• UnitedHealth Group’s second quarter 2020 revenues increased $1.5 billion to $62.1 billion, reflecting growth at Optum and the UnitedHealthcare public-sector and senior businesses, partially offset by economic-related impacts at UnitedHealthcare commercial and global.
• Second quarter earnings from operations increased $4.5 billion to $9.2 billion, impacted primarily by the previously described deferred care in the risk-based businesses, with this care expected to be delivered in future periods.
• Cash flows from operations were $10.0 billion or 1.5 times net income in the second quarter and $12.9 billion or 1.3 times net income year to date.
• The second quarter medical care ratio was impacted by the temporary deferral of care due to the pandemic, declining to 70.2% from 83.1% last year. The Company expects the medical care ratio to rise in coming quarters as needed care is accessed. Favorable reserve development was $1.4 billion in the second quarter, nearly all related to the current year, and primarily due to higher than expected care deferrals in late March, further lowering the second quarter medical care ratio. Days claims payable were 50.4 days compared to 48.6 in the second quarter 2019 and 50.5 in the first quarter 2020.
• The operating cost ratio of 16.1% in the second quarter of 2020 increased from 13.9% in the same period last year, primarily due to the health insurance tax, COVID-19 response efforts and business mix.
• The Company returned $1.2 billion to shareholders in the second quarter via dividends, while the debt to total capital ratio was 40.9% at quarter end. Return on equity of 33.7% for the first half of 2020 reflects continued strong core operating performance and the temporary impact of care deferrals experienced during the second quarter 2020.

“Our 325,000 dedicated team members, including the 120,000 clinicians serving on the front lines of care, have tirelessly responded to COVID-19 with agility, innovation and compassion,” said David S. Wichmann, chief executive officer of UnitedHealth Group. “We moved swiftly to assist the people we serve and their care providers, including the provision of $3.5 billion in proactive voluntary customer assistance and accelerated care provider funding. We remain committed to taking further actions to address any future imbalances as a result of the pandemic.”

GUIDANCE:

UnitedHealth Group sees FY2020 EPS of $16.25-$16.55, versus the consensus of $16.29.

• The Company is maintaining its full year earnings per share outlook for 2020 of net earnings of $15.45 to $15.75 per share and adjusted net earnings of $16.25 to $16.55 per share.

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