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UnitedHealth Earnings: Diversification Benefits On Display as Medical Utilization Rises

UnitedHealth stock remains fairly valued, and our 2024 earnings forecast is above management’s outlook

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

UnitedHealth Group UNH turned in mildly stronger fourth-quarter results than expected, highlighting the benefits of its diversified business model even as medical utilization rose. However, those results were not enough for us to change our recently raised $520 fair value estimate, especially since the firm maintained its 2024 guidance. Shares dropped toward their fair value in early trading on concerns around medical utilization.

UnitedHealth reported strong operating results for the quarter, including 14% revenue, 12% operating profit, and 15% adjusted EPS growth. In the medical insurance business, medical membership grew 2% and revenue grew 12%, despite weakness in Medicaid (-4%) from resumed redetermination activities. However, increasing medical utilization constrained the segment’s operating profit growth to just 6%. Positively, the firm’s Optum franchises, which represent nearly half of its profits, benefited from the medical utilization trends, with 24% top-line and 15% operating profit growth, led by the caregiving unit Optum Health (33% revenue growth) and its PBM Optum Rx (20%), which helped offset weakness in medical insurance.

Management stuck to the 2024 guidance it gave at investor day, including adjusted EPS of $27.50-$28.00, or 10% growth at the midpoint. While that initial guidance remains below the firm’s long-term annual earnings growth goal of 13%-16%, we think it recognizes the challenges managed-care organizations face in 2024, including ongoing Medicaid redeterminations, regulatory headwinds that may decelerate Medicare Advantage growth, and increasing medical utilization. But UnitedHealth tends to outperform its initial projections, and we remain comfortable with our 2024 forecast that’s mildly above management’s outlook.

UnitedHealth Group Stock Price

Data as of 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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