UNH
📉 UnitedHealth’s stock dropped significantly following its earnings report due to higher-than-expected medical costs in the Medicare sector, leading to a cut in its full-year earnings guidance by about 15%.
📊 Despite the guidance cut, Q1 results showed revenue growth near 10% and operating profit growth of 15%, driven partly by reduced operating cost ratios, though net profit margins were impacted.
🤔 The company now trades at an estimated forward Price-to-Earnings (PER) ratio of 18, which appears attractive, but the complexity of the healthcare sector and uncertainty around future costs warrant caution.
@invertirdesdecasa:
“UnitedHealth experienced a harsh market drop after presenting its earnings report, falling nearly 25% at one point, settling around 22-23%, and trading at $454 per share. The company’s market capitalization is $415 billion. Analyzing its latest quarterly report compared to the previous year, revenues reached almost $110 billion, growing nearly 10% year-over-year. Operating profit was $9.1 billion, up 15%, partly due to a reduction in total operating costs as a percentage of sales (12.4% vs. 14.1%). However, net profit was $6.3 billion; the prior year’s quarter had a loss due to a subsidiary sale. A key concern causing the stock drop was the rising medical costs, especially in the Medicare Advantage sector, exceeding expectations. This led UnitedHealth to reduce its full-year EPS guidance from $29-$30 to $26-$26.50, a significant 15% cut. The company operates across various health sectors: private insurance, health services (hospitals, doctors), Medicare Advantage, pharmacy benefit management (Optum RX), and IT services (Optum Insight), which suffered a hack last year. Understanding this complex business is crucial. The stock’s fall was fundamentally tied to these increased Medicare costs and reduced profit expectations. Based on the revised guidance, the estimated net earnings are around $23.5 billion, giving it a forward PER of about 18 times. While this multiple seems attractive for a solid, predictable company that returns capital via dividends and buybacks, the challenges in managing Medicare costs and the overall complexity of the US healthcare system introduce significant uncertainty.”
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