Healthcare Stocks Gain Big After UnitedHealths Reports Stronger-than-Expected Earnings

Includes: AET, ANTM, CI, UNH
by: Jonathan Liss

Excerpt from our One Page Annotated Wall Street Journal Summary (receive it by email every morning by signing up here):

UnitedHealth Profit Rises 26%, Aided by Medicare Drug Plan

  • Summary: UnitedHealth Group (NYSE:UNH) reported a 26% increase in second-quarter profit, reflecting an acquisition and strong enrollment in its new Medicare drug-benefit plan. Net income rose to $974 million, or 70 cents a share, from $770 million, or 58 cents a share, a year earlier. Earnings growth was boosted by the recent acquisition of PacifiCare Health Systems Inc., and by the large number of people UnitedHealth has enrolled in its new Medicare drug-benefit plans. Revenue climbed 57% to $17.92 billion. Quarterly estimates had been for revenue of $17.92 billion but for EPS of only $0.68 -- meaning UNH came in above estimates. UNH also boosted projections for full-year per-share earnings to between $2.91 and $2.95, from its previous range of $2.88 to $2.92. Now the largest managed-care company in terms of revenue, UNH is the first to report during each earnings season and is typically seen as a harbinger for the rest of the industry. In addition to UNH shares gaining 5.2% in trading yesterday, other healthcare stocks also performed well with WellPoint Inc. (WLP) shares up 2.3%, Aetna Inc. (NYSE:AET) climbing 4.9% and Cigna Corp. (NYSE:CI) rising 3.7%. UnitedHealth executives insisted profits will continue to rise in the second half, in large part because of its 5.7 million enrollees in the Medicare drug benefit. However, in their conference call with analysts, UNH executives steered clear discussing the inquiries into past stock-option grants to top company executives.
  • Comment on related stocks/ETFs: Regular Seeking Alpha contributor Eddy Elfenbein already predicted UNH's upside in his piece UnitedHealth Bounces Back Ahead of Earnings , which appeared on July 12. To see which companies other than UNH are currently involved in options backdating scandals, see WSJ Options Scandal Scorecard.

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Tagged: , Health Care Plans, Earnings
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