- UnitedHealth's earnings beat analyst predictions, with a 6% YOY gain in revenue
- However, the lasting impact of the recent cyberattack remain
- With this mixed picture, we examine whether UnitedHealth stock is a buy right now
UnitedHealth (NYSE:UNH) exceeded Q2 forecasts with $98.9B in revenue and $6.80 EPS, despite a costly cyberattack, rising medical costs, and strategic shifts impacting its 2024 outlook.
US insurance giant UnitedHealth posted better-than-expected Q2 earnings Tuesday, with revenue up more than 6% year-on-year.
The S&P 500 firm reported earnings per share (EPS) of $6.80, above analyst expectations of $6.67, while revenue came in at $98.9 billion, up from $92.90 billion last year and beating the consensus estimate of $98.72 billion.
UnitedHealth’s medical care ratio, which is the percentage of money spent on services, increased to 85.1% from 83.2%, above the consensus of 84.5%.
Total operating costs for the second quarter increased by 7.2% to $90.98 billion, including an 8.6% increase in medical costs to $65.46 billion. As of June 30, the company has served 29.57 million people domestically, compared to 27.18 million a year ago.
Cyberattack Still a Major Hurdle
Despite a strong second quarter, UnitedHealth stock was marginally down in early morning trading, with the after-effects of February’s cyberattack still fueling investor concern.
The attack, considered to be one of the worst ever inflicted on American healthcare, is expected to cost the firm more than $2.3 billion.
For 2024, the company updated its net earnings outlook to $15.95 to $16.40 per share, reflecting the estimated impact on its Change Healthcare (NASDAQ:CHNG) unit, and the classification of its remaining South America operations as held for sale. UnitedHealth recently concluded the sale of its Brazilian business.
At the end of the first quarter, the company projected its 2024 net earnings outlook in a range of $17.60 to $18.20 per share. However, the company affirmed its adjusted net earnings outlook of $27.50 to $28.00 per share.
Despite the early morning blip, UnitedHealth’s stock is up almost 4% at the time of writing. The stock is on track for a six-session win streak.
However, the stock is still down almost 1% YTD, compared to an almost 10% gain for the Health Care Select Sector SPDR ETF (NYSE:XLV) and an almost 20% gain for the S&P 500.
What Now for UnitedHealth Stock?
We believe the stock is still poised to earn returns for its investors, and there are several reasons for this, including a strong market position, expansion of service offerings, new deals, and renewed agreements. Not to mention, the company has now beaten EPS expectations for at least 21 straight quarters.
Moreover, the company has a sound balance sheet and is using its cash prudently to buy back shares and distribute dividends. Last month, the company raised its annual dividend by 12%, the 15th consecutive year of double-digit increases.
UnitedHealth’s government business also looks impressive, especially with Trump looking increasingly likely to become the next president. The global health insurance industry’s positive outlook, estimated to grow at a CAGR of 6.2% from 2024 through 2032, also bodes well for this leader in the health insurance sector.
Though its global business, regulatory investigations, and high operating costs due to rising medical expenses are still concerns, the company looks to be on the right path. With this in mind, UnitedHealth’s diversified portfolio, AI-driven analytics, strategic growth initiatives in home healthcare, and favorable macro environment should continue to push its growth.