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UnitedHealth Earnings: What’s In Store For UNH Stock?

Wall Street sometimes seems to take for granted UnitedHealth’s earnings power. That has regularly made earnings reports a catalyst for UNH stock breakouts to record highs. But UnitedHealth Group‘s (UNH) Q3 report before Thursday’s open may not be one of those times, for two reasons.




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First, UnitedHealth may not substantially beat on costs due to Covid’s unexpected delta wave. It’s possible that enough nonemergency care was deferred to balance out Covid treatment costs. However, health care use had been gradually normalizing since people feared seeking treatment early in the pandemic, so it’s not clear how much of an offset to expect. Second, regulatory uncertainty is at a near-term peak that probably won’t recede until it’s clear what Democrats will include in their social-spending reconciliation package.

The top managed care player by insured membership is a bellwether for the entire health care services industry. Its Optum division includes a massive physician and outpatient surgery empire and the technology prowess to wring inefficiency out of the health care sector. Despite those long-term strengths, there’s still risk of a Covid hiccup.

UnitedHealth Earnings

Analysts expect UnitedHealth earnings per share to grow 26% to $4.41. Revenue is seen rising to $71.55 billion, up nearly 10%, according to Zacks Investment Research.

Here’s one risk: UnitedHealth has warned all year that it faced a potential $1.80-per-share hit to earnings from Covid-related costs. For most of the year, Wall Street analysts weren’t buying what they saw as overly conservative UNH earnings guidance.

UNH Stock

The Dow Jones stock rose 0.1% to 403.55 in Wednesday’s stock market action. UNH stock now sits about 6% below a 431.46 buy point from an eight-week flat base, according to MarketSmith. A move above its 50-day line could offer an early entry.

UNH stock has been broadly underperforming the S&P 500 since early May, after going on a run following the Q1 UnitedHealth earnings report. Since then, UNH stock’s relative strength line, the blue line in the charts provided, has remained in a downtrend.

The Medical-Managed Care group now ranks a weak No. 148 of 197 industry groups based on stock performance and momentum.

Regulatory Risk

The Democrats can’t spare any votes in the Senate in passing their reconciliation package, which is now expected to cost around $2 trillion, far below earlier proposals. The effective veto for moderate senators will make it hard to pass politically controversial measures. However, a couple of significant health care changes are still in play.

The proposal to give Medicare power to negotiate drug prices could pinch profits for more than just drugmakers. Prescription benefit manager OptumRx would likely feel some impact.

Another proposed Medicare change would extend dental, hearing and vision benefits to traditional Medicare. Those extra benefits go a long way to explaining Medicare Advantage’s popularity and huge growth. Making them part of the default package might dilute growth of Medicare Advantage, where UnitedHealth has carved out a leading position.

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