UnitedHealth: Investors Lose Faith in Management

UnitedHealth earnings fall 73%, but shares jump

It’s true. UnitedHealth (UNH) reported earnings of $337 million, down from $1.22 billion for last year’s Q2. On an earnings-per-share basis, UNH earned 27 cents compared with 89 cents last year.

Now if we exclude some big charges, UNH made 67 cents for the quarter, which is just ahead of the 64 cents Wall Street was expecting. The stock was up yesterday, but that’s probably because investors were expecting more bad news. Earlier, the company said to expect 64 to 66 cents. If you can rally this well by beating the top end by a penny, I think it means that investors have lost confidence in management.

I can’t say I blame them. UNH said not once, but twice, that it was expecting FY08 earnings-per-share of $3.95 to $4. After its competitors lowered forecasts, UNH lowered its forecasts, not once but twice. First to a range of $3.55 to $3.60 a share, then down to $2.95 to $3.05 a share. That’s where we are now.

Disclosure: None

Comments

[CrossProfit_:]

"I think it means that investors have lost confidence in management."

Yes, this explains the low multiple. However, look at competitors to get an idea what the numbers will look like at UNH. Just because management doesn't have a clue what's going on doesn't mean that the business isn't functioning in line with peers.

Top layer of management is useless - agree. UNH has a solid business and a solid layer of middle management.

CrossProfit
Disclosure: no conflicts.

2008 Jul 23 05:29 AM

[User 117626:]

The management in UNH is little different from other companies they are all over paid and under worked, stupid and uncaring when it comes to the investor. Greed is the name of the game regardless of how you do it take the money as long as they will let you and then move on. When we the board step up and do their job by not hiring friends, old cornies and over priced idiots so they can hold thier job?

2008 Jul 23 07:28 AM

[tipalia:]

wow , 117626, you are right about incompetence but I can t agree with your poor choice of words.Sorry if you lost a lot of money with them which is also my case but I totally agree with crossprofit and playing the waiting game for a few more months.

2008 Jul 23 08:35 AM

[clintokk:]

UNH management is greedy. They cut the bonuses to the little people, and increased their own bonuses. They stated that their was a lack of money to go around. CEO bounuse was 2.5 million and yet there was not enough money to go around? They should give up their bonuses, and distribute them to the little people...this will increase morale. What a shame!

2008 Jul 23 10:54 AM

[morgan77:]

I'm surprised to see such a pessimistic view of UNH after reading this article (www.greenfaucet.com/tr...) which was very positive. Sure, the CEOs exit package was very controversial but for long term investors looking to get in, that should be a positive. It worked to drive down the price of the stock (to an undervalued level) and now presents a buying opportunity.
The main point is after this controversy settles, the fundamentals which made it so attractive in the first place haven't changed.
Read the article above if you want more information..

2008 Jul 23 03:04 PM