UnitedHealth Group Incorporated (NYSE:UNH) is scheduled to release its third-quarter 2023 financial results on October 13, before the market opens.
Analyst Projections
The Zacks Consensus Estimate for the third-quarter earnings per share stands at $6.33, representing a 9.3% increase compared to the previous year’s figure of $5.79. This consensus estimate has remained consistent over the past week. Moreover, the consensus estimate for third-quarter revenues is set at $91.4 billion, indicating a 13% growth compared to the figure reported in the same period last year.
UnitedHealth has consistently outperformed earnings expectations in the preceding four quarters, with an average beat of 3.4%.
Before delving into the details of what to anticipate for the upcoming quarter, it’s important to review UNH’s performance in the previous quarter.
Q2 Earnings Recap
In the previous quarter, the healthcare plan provider reported adjusted earnings of $6.14 per share, surpassing the Zacks Consensus Estimate by 3.7%. This strong performance was driven by an expanding customer base within UNH’s value-based care agreements. Additionally, the robust performance of Optum’s sub-units contributed to the quarterly results. However, this positive momentum was partially offset by increased expenses.
Now, let’s examine the factors that have shaped up ahead of the third-quarter earnings announcement.
Factors to Consider for Q3
UnitedHealth’s third-quarter results are expected to benefit from higher premiums, driven by substantial growth in its membership base. Projections for premium revenues suggest a year-over-year increase of over 9%, primarily due to elevated premiums generated from both Optum Health and its health benefits business. While product revenues are estimated to grow by 2% year-over-year, services revenues are predicted to experience a significant 33.6% increase compared to the previous year. The overall top-line performance for UNH in the third quarter is expected to be strengthened by increased service revenues across the spectrum.
Anticipated growth in UnitedHealthcare, UNH’s largest segment specializing in insurance sales, is expected due to higher memberships in selected programs. The Zacks Consensus Estimate for UnitedHealthcare’s total commercial customers indicates a 3.1% year-over-year growth. Furthermore, segmental revenues are estimated to grow by more than 8% year-over-year. Additionally, investments and other income are projected to increase by nearly 47% compared to the same period last year.
In the third quarter, we anticipate improved contributions from each of Optum’s business sub-segments. The growth in the number of individuals enrolled in value-based care arrangements and the increased strength of affiliated physicians are significant tailwinds. Our estimate for operating income from the Optum business segment suggests a 21% year-over-year increase, which is expected to drive overall bottom-line growth.
However, it is important to note that rising medical and operating costs may elevate UnitedHealth’s overall expenses in the quarter. Higher costs of products sold are expected to put pressure on margins. Additionally, medical costs are expected to rise due to seniors undergoing elective procedures that were delayed as a result of the pandemic.
The Zacks Consensus Estimate for UNH’s medical care ratio stands at 82.82%, up from 81.60% in the year-ago quarter. Our estimates for medical and operating costs indicate year-over-year increases of 10.5% and 7.4%, respectively. These factors could impact profit levels in the third quarter, making it uncertain whether UNH will beat earnings expectations.
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