What’s driving UnitedHealth Group Inc (NYSE: UNH) stock

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UnitedHealth Group Inc (NYSE: UNH) stock rose around 7.6% on 15th October, 2019 (as of 12:04 pm GMT-4; Source: google finance) after the company posted a better than expected results for the third quarter of FY 19 & raised the outlook for FY 19 as Optum revenues continue to pace topline growth for the biggest U.S. healthcare insurance group.

UNH in the third quarter of FY 19 has reported the adjusted earnings per share of $3.88, beating the analysts’ estimates for the adjusted earnings per share of $3.75, according to the FactSet consensus. The company had reported the adjusted revenue growth of 6.7 percent to $60.35 billion in the third quarter of FY 19, beating the analysts’ estimates for revenue of $59.78 billion as premiums revenue rose 6.2% to $47.40 billion to beat expectations of $47.05 billion. The revenues at Optum, its pharmacy benefits management business, rose 13.35 to $28.8 billion while the division’s bottom line rose 16.1% to $2.4 billion. OptumRx revenues grew 5.8% higher at $18.5 billion, while OptumHealth sales surged 34.4% to $8.1 billion. Medical costs, by far the company’s largest expense, had increased 8% compared to last year’s quarter and topped $39 billion, but UnitedHealth said that trend is within the expectations.

Moreover, the company’s third quarter operating cost ratio expanded by 20 basis points from the same period last year to 14.8 percent, due to the deferral of the health insurance tax and continued effects of operating cost productivity improvements, net of the effect of business mix changes and continued investments in innovation, service and growth.

The company’s third quarter dividends of $1.08 per share has increased by 20 percent year-over-year to $1 billion. The Company has repurchased 2.6 million shares for $600 million in the third quarter, bringing year-to-date purchases to 20.8 million shares for $5.1 billion. Return on equity of 26.2 percent in the period continued to reflect the Company’s efficient capital base and strong earnings profile.

The company raised its 2019 EPS guidance range to be in the range of $14.90 to $15.00 from $14.70 to $14.90. This is up 10 cents from the prior upgraded forecast from the summer, or 15 cents at the mid-point, which at the time were helped by the Trump administration’s move to scrap plans to require health insurers to return billions in rebates to patients under the government’s Medicare plan.

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