With UnitedHealth Q2 earnings coming up, how will it and other health insurers perform?

With UnitedHealth Q2 earnings coming up, how will it and other health insurers perform?


Wolterk

It’s early in the Q2 2022 earnings season, and as usual, UnitedHealth Group (NYSE:UNH) will be the first health insurer to report before the opening bell July 15.

UnitedHealth’s (UNH) results are closely looked at by investors as they are seen as a bellwether for the rest of the industry. The company is the largest health insurer based on membership.

UnitedHealth has a history of beating analyst estimates going back at least to Q2 2017.

For Q2 2022, analysts are expecting GAAP EPS of $4.99 and revenue of $79.68B.

As COVID-19 continues to have less of a daily impact, one statistic in earnings releases to pay attention to is change in the medical loss ratio (“MLR”). This represents the share of premiums that are actually spent on medical claims.

During the height of the pandemic, many doctor visits and procedures were put off, allowing the MLR to fall for many insurers. This helped the bottom line.

There are already signs MLRs are rising. In its Q1 results, the MLR was 82{3b930a6ca12a59604e1bbadfc55b7d1b7a0aa8613f1ab9377cace0d5afcb5fb9}, up from 80.9{3b930a6ca12a59604e1bbadfc55b7d1b7a0aa8613f1ab9377cace0d5afcb5fb9} in the year-ago period.

Despite the slight uptick, UnitedHealth (UNH) raised its fiscal 2022 EPS outlook.

The insurer’s track record is likely to continue on Friday. In June, Loop Capital initiated UnitedHealth (UNH) with a buy rating and a $575 price target (~11{3b930a6ca12a59604e1bbadfc55b7d1b7a0aa8613f1ab9377cace0d5afcb5fb9} upside based on Friday’s close) citing the insurer’s scale, leadership, and technology allowing it to have competitive advantages.

Although shares are only up ~4{3b930a6ca12a59604e1bbadfc55b7d1b7a0aa8613f1ab9377cace0d5afcb5fb9} year to date, the bullish sentiment for UnitedHealth is not universal. While saying it is a great company, Seeking Alpha contributor Jim Sloan just wrote that its shares are currently overvalued.

The health insurer with the best YTD performance — up ~19{3b930a6ca12a59604e1bbadfc55b7d1b7a0aa8613f1ab9377cace0d5afcb5fb9} — is Cigna (NYSE:CI). Its Q2 results come out on Aug. 4.

In June, Morgan Stanley upgraded shares to overweight from equal weight citing the potential launch of Humira (adalimumab) as a potential catalyst. Cigna (CI) owns pharmacy benefit manager (PBM) Evernorth, formerly known as Express Scripts. The firm has a price target of $296 (6{3b930a6ca12a59604e1bbadfc55b7d1b7a0aa8613f1ab9377cace0d5afcb5fb9} upside).

Other health insurers also have their own PBMs, which have recently come under scrutiny from federal regulators. In June, the Federal Trade Commission said it would launch a probe into the drug middlemen and prescription drug prices.

In an investor day presentation last month, Cigna (CI) projected a 10{3b930a6ca12a59604e1bbadfc55b7d1b7a0aa8613f1ab9377cace0d5afcb5fb9}-13{3b930a6ca12a59604e1bbadfc55b7d1b7a0aa8613f1ab9377cace0d5afcb5fb9} average annual EPS growth rate. The company said growth would come from several areas including commercial and U.S. government divisions, Evernorth, and targeted M&A.

For Q2 2022, analysts are expecting GAAP EPS of $4.58 and revenue of $44.34B.

Elevance Health (NYSE:ELV), which was known as Anthem until June, is best known as the the operator of many Blue Cross Blue Shield plans. The company will report on July 20 before the market open.

YTD, shares are up ~4{3b930a6ca12a59604e1bbadfc55b7d1b7a0aa8613f1ab9377cace0d5afcb5fb9}. In early June, the company reiterated its adjusted net income guidance for 2022 of more than $28.40 per share. Consensus is $28.21.

Based on a market-implied outlook, Seeking Alpha contributor Geoff Consedine notes that Elevance (ELV) is slightly bullish into 2023.

For Q2, analysts are expecting GAAP EPS of $7.31 and revenue of $38.08B.

Aetna, part of CVS Health (NYSE:CVS), has been performing well over the last few quarters. In Q1, the health care segment added $23.1B in revenue (out of $79.8B total for CVS) and Aetna added 674K new members. The company will report Q2 earnings on Aug. 3.

CVS’ (CVS) Q2 results may be negatively impact by its drug store division. That’s because the waning impact of COVID has eased tests performed and sold in stores, as well as vaccines administered.

For Q2, analysts are expecting GAAP EPS of $1.88 and revenue of $76.35B.

Humana (HUM) is the only managed care provider that has received a strong buy assessment from Seeking Alpha’s Quant Rating. It reports before the market open on July 27.

For years, the insurer has benefitted from its strong presence in the Medicare and Medicaid markets. The company has stated it intends to grow it Medicare Advantage membership by 150K-200K members in 2022.

Humana has beaten analyst EPS estimates since at least Q2 2017. For Q2, analysts are expecting GAAP EPS of $7.55 and revenue of $23.45B.

Quoted from Various Sources

Published for: Ipodifier