: UnitedHealth earnings beat estimates as company again raises guidance

UnitedHealth Group Inc.
UNH,
+2.68%

posted better-than-expected earnings for the third quarter on Friday and again raised its full-year guidance.

The healthcare-services and insurance giant reported net income of $5.841 billion, or $6.24 a share, for the quarter, up from $5.262 billion, or $5.55 a share, in the year-earlier period. Adjusted per-share earnings came to $6.56, ahead of the $6.33 FactSet consensus. Revenue rose to $92.361 billion from $80.894 billion a year ago, also ahead of the $91.414 billion FactSet consensus.

The company raised its full-year adjusted earnings guidance to a range of $24.85 to $25.00 per share, compared with a FactSet consensus of $24.83.

The third quarter medical loss ratio — or the percentage of premium dollars spent on clinical services and quality improvement — came to 82.3%, which was below expectations and “a highlight of the quarter,” Mizuho Securities analyst Ann Hynes wrote in a note Friday. Hynes maintained a buy rating on UnitedHealth shares and $549 price target.

On a call with analysts Friday, UnitedHealth faced several questions about coverage of popular diabetes and weight-loss drugs such as Ozempic and Wegovy. “We’re struggling, and frankly our clients are struggling, with the list prices which have been demanded on these products in the U.S.,” UnitedHealth CEO Andrew Witty said on the call.

Related news: Novo Nordisk boosts sales and profit outlook, buoyed by Ozempic and Wegovy

Regarding whether customers are seeking increased coverage of the drugs, “it’s a mixed bag,” Brian Thompson, CEO of the company’s UnitedHealthcare unit, said on the call Friday. “Some are seeking coverage, albeit dissatisfied with the price point. Some are backing off, given the cost.”

Clients see the cost of the drugs as an “open-ended financial risk,” Witty added on the call. “We’re trying to put forward to manufacturers a variety of options, but we need the manufacturers to move. It’s as simple as that.”

Even as the executives were speaking, Novo Nordisk
NVO,
+2.06%

boosted its full-year 2023 profit and sales outlook, citing heightened expectations for Ozempic and Wegovy sales.

Healthcare wage inflation was another concern raised by an analyst on the call Friday, given the recent or planned strikes that have affected major health systems such as Kaiser Permanente and Tenet Healthcare Corp.
THC,
+1.99%
.
UnitedHealth Group chief operating officer Dirk McMahon said on the call that the company has three-year contracts, muting the impact of any wage inflation, and the company itself has not had trouble recruiting nurses and other healthcare professionals.

UnitedHealth reported Friday that its quarterly Medicaid membership dropped 3.5%, compared with the previous quarter, as many people are now being kicked off state Medicaid rolls due to the expiration of pandemic-era rules that helped maintain continuous coverage. “The UnitedHealthcare team remains actively engaged with individuals impacted by the ongoing state-driven Medicaid eligibility redetermination process,” the company said in a release Friday.

UnitedHealth shares gained 1.6% Friday morning and are up 0.7% in the year to date, while the S&P 500
SPX,
-0.53%

has gained 12.9%.

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