Healthcare giant UnitedHealth Group (UNH -0.23%) reported third quarter 2024 earnings on Tuesday, Oct. 15, that topped analyst estimates on both the top and bottom lines. Revenue jumped year over year to $100.8 billion, and UnitedHealth's adjusted EPS came in at $7.15 (up 9%) despite managing a significant cyberattack during the quarter.
The quarter also revealed increased medical costs, with the medical care ratio rising 3.5 percentage points to 85.2%. Overall, UnitedHealth's financial resilience was evident despite operational disruptions.
| Q3 2024 | Analysts Estimates | Q3 2023 | Change (YOY) | |
|---|---|---|---|---|
| Total revenue | $100.8 billion | $98.14 billion | $92.4 billion | 9.1% |
| Earnings from operations | $8.7 billion | N/A | $8.5 billion | 2.4% |
| Adjusted EPS | $7.15 | $7.00 | $6.56 | 9% |
| Medical care ratio | 85.2% | N/A | 82.3% | 3.5 pps |
Source: UnitedHealth. Note: Analyst consensus estimates provided by FactSet. YOY = Year over year.
Business Overview and Key Focus Areas
UnitedHealth Group is a major player in the healthcare industry, operating through two primary business platforms: Optum and UnitedHealthcare. Optum provides technology-driven health solutions, offering a range of services from pharmaceutical benefits to healthcare delivery. UnitedHealthcare is focused on health benefits, serving individual, employer, and government program needs across the United States.
In recent years, the company's strategic focus has been on leveraging technology and data analytics to drive efficiency and improve healthcare outcomes. This includes investments in digital health technologies and expanding the reach of value-based care, which ties payments to health outcomes rather than service volume.
Quarterly Achievements and Challenges
Optum Health serviced 104 million consumers in Q3, up roughly 1 million from the prior year, with revenue under value-based models also seeing growth. Optum Rx noted increased customer engagement, contributing to a $5.4 billion year-over-year boost in revenue. Similarly, UnitedHealthcare expanded its domestic services to 29.7 million consumers, adding 2.4 million year-to-date.
However, the company faced challenges in the form of increased medical costs, reflected in a rise in the medical care ratio to 85.2%. Factors contributing to this included reductions in Medicare funding and a need for business mix adjustments. Moreover, UnitedHealth is navigating a complex regulatory environment that affects its cost structures, particularly Medicare and Medicaid policy constraints imposed by the Centers for Medicare and Medicaid Services (CMS).
A significant cyberattack during the quarter led to business disruptions, incurring direct response costs. The earnings report disclosed that these cybersecurity issues resulted in a fiscal impact estimated at approximately $0.75 per share, contributing to tighter operating margins. Despite these hurdles, UnitedHealth maintained its revenue growth momentum and continued to pay out a robust $5.6 billion in dividends ($2.11 per share). Share buybacks for the quarter totaled just over $4 billion.
Outlook for Future Quarters
Management is optimistic about continued financial performance into 2025, but it did adjust its net earnings outlook for 2024 down somewhat to $27.50 to $27.75 per share. This new outlook leans toward the low end of prior guidance and the adjustment is tied to an estimated additional 10 cents per share in Change Healthcare hack-related costs. The company is focusing on enhancing operational efficiencies through further investments in artificial intelligence and technological capabilities. This strategic direction aims to support future growth and streamline healthcare delivery processes.
Going forward, UnitedHealth will prioritize navigating the Medicare Advantage landscape and regulatory dynamics. Investors should watch for ongoing developments in this area, as well as potential new product launches or strategic partnerships aimed at diversifying revenue streams. The focus on innovation and customer engagement remains central to the company's long-term strategy, ensuring it remains well-positioned in the competitive healthcare market.
