Stock of the Day
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UnitedHealth Group (UNH)
UnitedHealth Group Profit Grew 30% Despite High Unemployment
As the health-care debate continues to be a hot-button issue, investors and analysts weren't sure what to expect from UnitedHealth Group, the largest provider of managed-care in the United States. How would membership enrollment respond to increasing unemployment, would Medicare see an increase or decrease in enrollment, and how would medical costs impact the company's revenue. Analysts were hoping for a strong performance, but was the company able to bring out strength and health in itself?
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Analysts were hoping that the company would report a profit of 73 cents per share, and revenue of $21.72 billion. And happily enough, the company was able to surpass expectations, bringing in revenue of $21.78 billion, and a profit of $944 million, or 81 cents per share. Revenue increased 6.5% from the year before, and profit climbed 30%. UnitedHealth also reaffirmed its forecast for 2010, hoping for earnings between $2.90-$3.10 per share, a range which includes analysts' expectations of $3.06.
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Although the numbers look strong, there is one major concern for UnitedHealth, and that is the fear of losing more and more customers. In today's conference call, CEO Stephen Hemsley reported that "Attrition continues to run at a high level and will be a concern all year in this economy." As unemployment continues to rise, health-care membership continues to fall. In the past year, UnitedHealth has seen commercial enrollment fall 6.5%, mostly due to layoffs and job cuts. And although the company knows losses will continue as unemployment remains at a high level, the company predicts that losses will be at a lower rate than in 2009.
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But despite some economic hurdles, the company has been performing solidly. The company was able to increase its Medicare enrollment by 20%. The amount that the company spent on medical costs went up slightly in 2009, but was not as high as expected. Furthermore, the company's stock was trading at a 12-month high yesterday, partly due to the belief that the Democrat's health care bill would no longer be able to pass due to the election of a Republican Senator in Massachusetts. Although the company seems to be confident in their performance this upcoming year, they still acknowledge that this is a rough time for managed-care insurance companies. On Wednesday another major insurer, WellPoint Inc. (WLP: Charts, News, Offers) will report earnings, and we will see if they were also able to overcome the same hurdles, and if they agree with analyst Steven Shubitz' statement that "2010 is going to be difficult all around for managed care."
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Health Care Commentary:
A 'Brown'-out for health care stocks? - One school of thought is that UnitedHealth and other insurers will benefit from the health care plan not moving forward...
Health Reform Would Help Insurers - ...This author, however, thinks the opposite should be true, and that the new health care plan would be a major benefit to all major insurance companies.
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More Stocks in the News:
The Times to Charge for Frequent Access to Its Web Site - After being rumored for a while, The New York Times (NYT: Charts, News, Offers) finally confirmed yesterday that they will indeed be adopting a paywall for online users of their website.
Goldman Taunts, Terrorizes Wall Street With Huge Quarter - Goldman Sachs Group (GS: Charts, News, Offers) showed today that they significantly decreased employee compensation, but still shows a stunningly high average salary.
Continental, Southwest Air Beat Profit Estimates on Fuel Costs - Two major airlines reported earnings that beat estimates, with Continental (CAL: Charts, News, Offers) even posting a surprise profit.
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Profile |
Click here to view a detailed profile of UnitedHealth Group.
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