Health insurance stocks, including UnitedHealth Group (UNH), have been experiencing a surge in value since the company’s last earnings report in mid-July. UNH shares have risen by 17%, while the S&P 500 Managed Health Care sub-industry index has seen a 15% increase. In contrast, the overall S&P 500 has declined by 3% during the same period.
Investors eagerly await UnitedHealth’s third-quarter earnings report, which will shed light on whether the company, and the managed care sector as a whole, can sustain this upward momentum. As one of the leading healthcare companies, UnitedHealth’s results and guidance often provide valuable insights into the broader industry trends.
Analysts on Wall Street anticipate that UnitedHealth will announce third-quarter earnings of $6.32 per share, representing growth compared to $5.79 per share in the same quarter of the previous year, according to FactSet.
During the second quarter earnings report in July, concerns emerged among investors regarding high utilization rates in UnitedHealth’s Medicare Advantage business and its potential impact on the company’s performance. However, the second-quarter earnings surpassed expectations, and the company’s medical loss ratio, a key metric that reflects the proportion of healthcare premiums allocated towards medical expenses, aligned with analyst predictions.
Q2 Medical Loss Ratio Exceeds Expectations
The second quarter medical loss ratio (MLR) for UnitedHealth came in at 83.2%, surpassing last year’s 81% but falling short of investors’ concerns. However, analysts predict that the MLR will decrease to 82.8% in the third quarter, according to FactSet data.
Looking Ahead to 2024
Investors eagerly anticipate any insights from UnitedHealth executives regarding the company’s outlook for 2024.
Assessing the Impact of GLP-1 Obesity Drugs
The market is currently abuzz with speculations about the potential impact of GLP-1 obesity drugs. Each day brings fresh worries about how these drugs might affect specific sectors, triggering rounds of selloffs. Consequently, UnitedHealth executives are likely to face questions about their perspective on the GLP-1s and their strategies for financing these medications.
Spotlight on OptumRx
Another topic that may arise during discussions is UnitedHealth’s pharmacy benefit manager, OptumRx. The PBM sector has been confronted with mounting challenges to its business model, as evidenced by a recent decision from a regional nonprofit insurance company to largely discontinue its reliance on a PBM. Executives might anticipate inquiries into how they plan to navigate these hurdles.
Share Performance and Investor Call
UnitedHealth shares have seen a slight decline of 1.1% so far this year. To address investor concerns and provide updates, the company has scheduled an investor call on Friday at 8:45 a.m.