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UnitedHealth Earnings: 2024 Outlook Maintained Despite Change Outage and Elevated Utilization

Adjusted EPS guidance remains below the firm’s long-term annual earnings growth goal.

In this photo illustration, the UnitedHealthcare logo seen displayed on a smartphone screen and in the background.

Key Morningstar Metrics for UnitedHealth Group

What We Thought of UnitedHealth Group’s Earnings

On an adjusted basis, UnitedHealth Group UNH turned in stronger first-quarter results than expected, offsetting the anticipated disruptions from the Change cyberattack, as management maintained its adjusted earnings per share outlook for the year. Industry investors may be pleased that medical utilization is also trending toward the firm’s expectations. We maintain our $520 fair value estimate, which remains moderately above recent trades.

UnitedHealth reported solid operating results for the quarter, including 9% revenue and 10% adjusted EPS growth, even as the Change outage and Brazil business exit negatively affected reported results. We were particularly pleased to see medical utilization remain in line with management’s expectations, including a medical cost ratio of 84.3% similar to the firm’s full-year goal (83.5%-84.5%), despite including 40 basis points of support to caregivers during the Change outage.

In medical insurance, US medical membership grew 3% during the quarter and total revenue grew by 7%, as commercial member growth more than offset declining Medicaid membership related to eligibility redeterminations. Additionally, the Optum franchises, which represent about half of profits, continued to perform decently with 13% top-line growth, led by the Optum Health provider unit (16% revenue growth) and the Optum Rx pharmacy benefit manager (12%), which offset the Optum Insight weakness (0%) related to the Change outage.

Management largely stuck to its 2024 guidance, including adjusted EPS of $27.50-$28.00, as the first quarter’s outperformance will likely offset Change business disruption effects. 2024 adjusted EPS guidance (9%-11% growth) remains below the firm’s long-term annual earnings growth goal of 13%-16%, primarily due to industrywide challenges in 2024, including ongoing Medicaid redeterminations, headwinds in Medicare Advantage, and elevated medical utilization.

UnitedHealth Group Stock vs. Morningstar Fair Value Estimate

Source: Morningstar Direct.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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About the Author

Julie Utterback

Senior Equity Analyst
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Julie Utterback is a senior equity analyst for Morningstar Research Services LLC, a wholly owned subsidiary of Morningstar, Inc. Within the healthcare industry, she covers medical technology and service companies. She is also the chairperson of the equity research team’s capital allocation methodology.

Utterback joined Morningstar in 2005 as an equity analyst in the healthcare industry. At that time, she covered medical technology companies, including orthopedic device, medical equipment, and cardiac device firms. In 2010, she joined Morningstar's credit research team, initiating coverage of the entire healthcare industry and generally helping the organization expand and maintain its credit coverage across many industries. She held that senior credit analyst role until April 2019, when she returned to the equity team to cover medical technology and service companies.

Prior to joining Morningstar, Utterback was an equity analyst at State Farm Insurance for several years. She holds a bachelor's degree in finance from the University of Illinois Urbana-Champaign. She also holds the Chartered Financial Analyst® designation.

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