October 16, 2018 / 10:26 AM / a month ago

UnitedHealth forecasts 2019 profit gains after earnings beat

(Reuters) - UnitedHealth Group Inc (UNH.N) on Tuesday backed Wall Street’s 2019 earnings forecast, citing momentum in newer businesses like providing medical services and traditional areas, including managing U.S. government Medicare health insurance plans.

FILE PHOTO: Traders work at the post where UnitedHealth Group is traded on the floor of the New York Stock Exchange (NYSE) in New York, U.S., January 31, 2018. REUTERS/Brendan McDermid/File Photo

The forecast from UnitedHealth, the largest U.S. health insurer, came as it reported better-than-expected third quarter profit, sending shares up 3.7 percent to $269.65.

It also lifted shares of rivals that will report earnings over the next few weeks, including Anthem Inc (ANTM.N), Cigna Corp (CI.N) and Humana Inc.(HUM.N).

“We enter 2019 with energy and optimism for the future,” UnitedHealth Chief Executive Officer Dave Wichmann said during a conference call with analysts. He said Wall Street’s consensus forecast “captures our 2019 outlook, within a typically sized range.”

The average analyst adjusted earnings estimate for 2019 is $14.41 per share, according to I/B/E/S data from Refinitiv.

BMO Capital Markets analyst Matt Borsch said the company’s raised outlook as well as its low medical services costs in 2018 was a relief to investors, and boosted UnitedHealth shares.

UnitedHealth also raised its outlook for 2018 profit to approaching $12.80 per share from a range of $12.50 and $12.75.

The company is facing increasing competition from Cigna and Aetna Inc (AET.N) after the two rivals each agreed to combine with large pharmacy benefit managers for a business model that will mimic UnitedHealth and its Optum unit.

Cigna is buying Express Scripts Holding Co (ESRX.O), while Aetna has agreed to be bought by CVS Health (CVS.N). Both deals are due to close this year.

The insurer is also facing potential upheaval as large corporations look for new ways to provide healthcare, such as by working directly with medical providers. Amazon.com Inc (AMZN.O), JP Morgan Chase & Co (JPM.N) and Berkshire Hathaway Inc (BRKa.N) have plans to overhaul healthcare for their U.S. employees.

UnitedHealth added 2.8 million insurance members in the third quarter from a year ago and posted revenue of $45.94 billion, up 12.8 percent from last year.

Sales from Optum, which includes the pharmacy benefit management, healthcare delivery and specialty pharmacy businesses, grew nearly 11 percent to $25.39 billion.

The company’s medical care ratio, or the percentage of premiums it paid out for medical services, was 81 percent in the quarter, compared with 81.4 percent last year.

Net earnings rose 28 percent to $3.19 billion, or $3.24 per share, in the quarter ended Sept. 30.

Excluding items, the company earned $3.41 per share, topping analysts’ average expectations by 12 cents.

Reporting by Caroline Humer in New York and Tamara Mathias in Bengaluru; Editing by Maju Samuel and Bill Berkrot

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