Healthcare Stock to Watch: UnitedHealth Group Inc (NYSE: UNH)

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UnitedHealth Group Inc (NYSE: UNH) stock rose over 0.3% on 16th July, 2021 (As of 13:11:43 UTC-4 · USD; Source: Google finance) after the company posted better than expected results for the second quarter of FY 21 and boosted its full-year outlook for a second time this year.

The second quarter 2021 medical care ratio has increased to 82.8% compared to 70.2% last year, with the variance due to second quarter 2020 COVID-19 effects. Favorable medical reserve development was $500 million in the quarter compared to $1.0 billion in the first quarter 2021 and $1.4 billion in the second quarter last year. Days claims payable of 49.1 days compared to 49.8 days in the first quarter 2021 and 50.4 days in the second quarter 2020. The second quarter 2021 operating cost ratio of 14.5% decreased from 16.1% in second quarter 2020 driven by the repeal of the health insurance tax, broad-based 2020 investments to support people and health systems, the revenue-related effects of the pandemic, and continued productivity advances, partially offset by business mix and investments.

UNH in the second quarter of FY 21 has reported the adjusted earnings per share of $4.70, beating the analysts’ estimates for the adjusted earnings per share of $4.46, according to analysts by Zacks Investment Research. The company had reported the adjusted revenue growth of 14.8 percent to $71.32 billion in the second quarter of FY 21, beating the analysts’ estimates for revenue of $69.22 billion. The revenue growth is driven by the well-diversified growth across the enterprise, including double-digit percentage growth at both Optum and UnitedHealthcare. Optum second quarter revenues of $38.3 billion grew 17.2% and operating earnings of $2.9 billion rose 29.1%, with each of the three Optum businesses contributing double-digit operating earnings growth. OptumInsight’s revenue backlog increased by 10% compared to the second quarter 2020 to $21.3 billion, driven by growth in comprehensive managed services.

Additionally, the Company has returned $1.4 billion to shareholders in the second quarter via dividends, following a 16% increase in June 2021. In the quarter, 3.2 million shares were repurchased for $1.2 billion, bringing year-to-date repurchases to 7.9 million shares for $2.9 billion.

The company expects full-year adjusted earnings to be in a range of $18.30 to $18.80 per share. In April the company had raised its forecast to $18.10 to $18.60 per share, up from an outlook of $17.75 to $18.25 per share that it debuted in December. The analysts polled by FactSet predict full-year earnings of $18.57 per share.

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