Today, UnitedHealth (UNH, Financial) experienced a significant upswing, marking a 5% increase as it overcame a series of hurdles to surpass Q1 earnings expectations and reaffirm its FY24 earnings per share (EPS) forecast. Despite facing obstacles such as increased medical costs, a severe cybersecurity attack, and unchanged Medicare Advantage rates by the Centers for Medicare & Medicaid Services (CMS), UNH managed to bounce back from a 20% fall to multi-year lows prior to its Q1 announcement.
UNH's Q1 report was a breath of fresh air for investors, showcasing the company's resilience with a bottom-line beat and a steady outlook for FY24, targeting an EPS of $27.50-28.00. This positive momentum comes after a period of selling pressure, setting a low expectation benchmark that UNH successfully exceeded.
- UNH's adjusted EPS hit $6.91, outperforming analyst predictions by a significant margin despite a $0.30-0.40 per share impact from a cyberattack at its Change Healthcare unit, part of Optum. Notably, costs related to the attack's resolution are excluded from the adjusted EPS.
- The company's medical care ratio (MCR) for Q1 aligned with its FY24 forecast at 84.3%, including a 40 basis point impact from the cyberattack. This represents a substantial improvement from the previous quarter's 85.0% MCR, though it's up 210 basis points year-over-year, mainly due to Medicare funding cutbacks.
- After CMS maintained its Medicare Advantage rate at 3.70%, UNH emphasized its strategy to navigate the reduced funding environment, confident in its competitive positioning through a long-term approach initiated last year.
- OptumRx and OptumHealth divisions reported revenue increases of 12% and 16% year-over-year, respectively, with OptumHealth serving an increasing patient base. UNH is on track to manage nearly 5.0 million patients under value-based care by year-end, supporting further bottom-line growth. Overall, UNH's revenue rose by 8.6% year-over-year to $99.8 billion.
Despite the challenges faced before its Q1 report, including concerns over CMS's Medicare Advantage rate decision, UNH demonstrated its capability to navigate through adversity, signaling a positive outlook. This performance not only benefits UNH but also sets an encouraging precedent for its peers, including Elevance Health (ELV, Financial) on April 18, Humana (HUM, Financial) on April 24, Molina Healthcare (MOH, Financial) on April 24, and Centene (CNC, Financial) on April 26, as they prepare to release their Q1 results.
