UnitedHealth Group Incorporated (NYSE:UNH) surpassed expectations in its first-quarter 2024 earnings report, with adjusted earnings per share (EPS) of $6.91, exceeding the Zacks Consensus Estimate by 4.2%. The company experienced a 10.4% year-over-year increase in bottom-line results.
Total revenues for the quarter reached $99.8 billion, marking an 8.6% improvement from the previous year. Strong performances from its UnitedHealthcare and Optum business segments drove this growth, surpassing the consensus estimate of $99.2 billion.
The robust quarterly performance was fueled by domestic growth in clientele and the expansion of UNH’s value-based care initiatives. Additionally, the consistent expansion of its service businesses contributed to the positive results, although these gains were somewhat offset by notable rises in medical costs and operating expenses.
Q1 Business Performance Highlights
UnitedHealth Group’s medical care ratio deteriorated by 210 basis points year over year to 84.3%, exceeding both the Zacks Consensus Estimate and internal projections. Operating costs improved by 70 basis points to 14.1%.
Total operating costs rose to $91.9 billion, a 9.6% increase over the previous year, primarily due to heightened medical and operating expenses, as well as increased product costs. Operating earnings declined by 2.5% to $7.9 billion, resulting in a net margin of negative 1.4% compared to 6.1% in the same quarter last year.
Detailed Business Segment Performance
UnitedHealth Group’s health benefits division, UnitedHealthcare, generated $75.4 billion in revenues, a 7% increase year over year driven by domestic membership growth, though slightly missing estimates. Optum, the company’s health services platform, reported revenues of $61.1 billion, representing a 12.9% year-over-year increase and surpassing estimates.
Optum’s performance was supported by strong contributions from its sub-units, including Optum Health, Optum Insight, and Optum Rx, which benefited from expanded customer bases and enhanced technological offerings.
Membership Decline
UnitedHealthcare’s membership declined by 2.7% year over year to 51.5 million people as of March 31, 2024, primarily due to reductions in its Global Commercial and Medicaid businesses, falling short of expectations.
Financial Position
As of March 31, 2024, UnitedHealth Group held cash and short-term investments totaling $32.7 billion, up from $29.6 billion at the end of 2023. Total assets reached $284.2 billion, while long-term debt increased to $63.9 billion.
Cash Flow and Capital Deployment
Operating cash flows for the first quarter of 2024 amounted to $1.1 billion, a significant decrease primarily attributed to the impact of a cyber-attack on Change Healthcare. UNH returned $4.8 billion to shareholders through share repurchases and dividends during the quarter.
2024 Outlook
Management projects a net EPS range of $17.6 to $18.2 for 2024, factoring in the impact of sales in Brazil and costs associated with the cyber-attack. Adjusted net EPS is forecasted between $27.50 and $28.00, indicating a 10.5% improvement over 2023 figures.
Revenue estimates range from $400 billion to $403 billion, with operating cash flows projected between $30 billion and $31 billion. Direct response costs are expected to range from 85 to 95 cents per share, with a business disruption impact of 30 to 40 cents per share anticipated for 2024.
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