UnitedHealth Stock Q4 Earnings Preview: Buy Now or Wait for Results?

UnitedHealth Group Incorporated UNH is set to report fourth-quarter 2024 results on Jan. 16, 2025, before the opening bell. The Zacks Consensus Estimate for the to-be-reported quarter’s earnings is currently pegged at $6.72 per shareon revenues of $102.25 billion. Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.Fourth-quarter earnings estimates have been revised downward by a penny over the past seven days. However, the bottom-line projection indicates an increase of 9.1% from the year-ago reported number. The Zacks Consensus Estimate for quarterly revenues suggests year-over-year growth of 8.3%. Image Source: Zacks Investment ResearchFor the current year, the Zacks Consensus Estimate for UnitedHealth’s revenues is pegged at $401.73 billion, implying a rise of 8.1% year over year. Also, the consensus mark for current-year earnings per share is pegged at $27.60, implying a jump of around 9.9% on a year-over-year basis.UnitedHealthhas a robust history of surpassing earnings estimates, beating the consensus estimate in each of the last four quarters, with the average surprise being 2.8%. This is depicted in the figure below.UnitedHealth Group Incorporated Price and EPS Surprise UnitedHealth Group Incorporated price-eps-surprise | UnitedHealth Group Incorporated QuoteQ4 Earnings Whispers for UNHHowever, our proven model does not conclusively predict an earnings beat for the company this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy), or 3 (Hold) increases the odds of an earnings beat, but that’s not the case here.UNH has an Earnings ESP of -0.03% and a Zacks Rank #3.You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.You can see the complete list of today’s Zacks #1 Rank stocks here.What’s Shaping UNH’s Q4 Results?UnitedHealth's fourth-quarter earnings are expected to have benefited from higher premiums, driven by the expansion of its commercial membership base. The Zacks Consensus Estimate for premium revenues for the fourth quarter indicates nearly 7% year-over-year growth, whereas our model estimate suggests a 7.8% increase. Higher contributions from both Optum Health and UnitedHealthcare divisions are expected to have supported premium growth.UNH's fourth-quarter top-line performance is expected to have been enhanced by a rise in service revenues from the Optum brand. The consensus estimate implies a 7.5% jump in service revenues. Similarly, the Zacks Consensus Estimate for product revenues indicates a more than 15% increase.Value-based care expansion in Optum Health, new client wins at Optum Rx and enhanced technology-enabled offerings are major tailwinds for the company’s results. The Zacks Consensus Estimate for operating income from the Optum business segment suggests a 17% year-over-year increase. Meanwhile, the Zacks Consensus Estimate for operating income from UnitedHealthcare indicates only 2.1% year-over-year growth. These are expected to have positioned the company for year-over-year growth in the fourth quarter.However, Optum survived a blow from a cyber-attack on its Change Healthcare business in the first quarter. The company expects to incur direct response costs in the range of $2.15 per share for 2024, along with a business disruption impact of 75 cents. These are expected to have partially affected its profit growth levels in the fourth quarter.Now, let’s focus on memberships in selected programs. The Zacks Consensus Estimate for UnitedHealthcare’s total domestic commercial customers suggests 4.7% year-over-year growth, whereas our estimate implies a 4.5% gain. The consensus mark for Medicare Advantage members indicates a 3% year-over-year rise.However, the consensus estimate for Medicaid memberships implies a 4.6% decline from the year-ago level, while our model estimate suggests a 4.9% slip. Also, the consensus mark for international memberships indicates a nearly 79% year-over-year plunge. These are likely to have pulled total memberships down from the year-ago period. Both the consensus estimate and our model estimate imply a more than 4% fall year over year.Rising medical costs, as seniors continue resuming elective procedures, are expected to have elevated UnitedHealth’s overall expenses in the quarter. The expected growth in healthcare utilization, especially in the Medicare Advantage space, might have affected margins, making an earnings beat uncertain this time around. Our model estimate for total operating costs indicates a 7.8% increase from the prior-year period.The Zacks Consensus Estimate for UNH’s medical care ratio is pegged at 86.08%, up from 85% in the year-ago quarter. Our estimates for medical costs and costs of products soldindicate 7.2% and 12.6% year-over-year increases, respectively.UNH’s Price Performance & ValuationUnitedHealth's stock has declined 3.5% in the past year compared with the industry’s fall of 8.2%. Its peers like Humana Inc. HUM and Molina Healthcare, Inc. MOH have plunged 40.9% and 25.4%, respectively, during this time. All these stocks have lagged the S&P 500 significantly, which has rallied 23.1% during the same period.UNH One-Year Price Performance Image Source: Zacks Investment ResearchNow, let’s look at the value UnitedHealth offers investors at current levels.The company’s valuation looks somewhat stretched compared with the industry average. Currently, UNH is trading at 17.40X forward 12 months earnings, below its five-year median of 19.19X but above the industry’s average of 14.67X. Image Source: Zacks Investment ResearchHow Should You Play UNH Pre-Q4 Earnings?UnitedHealth’s diversified portfolio and strategic growth initiatives in home healthcare, commercial business and AI-driven analytics offer strong long-term growth potential. Its estimated earnings growth rate of 12.3% for the next five years shows promise. With an estimated 12.3% annual earnings growth over the next five years, the company remains a solid prospect for patient investors. Its robust cash flow supports shareholder-friendly policies like dividends and share buybacks, reflecting its operational resilience.However, near-term challenges could weigh on the stock. Recent cyber-attacks and regulatory investigations have created headwinds alongside margin pressures from lower-than-expected Medicare rates and rising medical costs. A tragic incident involving an executive’s murder also triggered a social media backlash, amplifying scrutiny of the healthcare system. Declining global membership and an increasing medical care ratio add to the concerns.For now, current shareholders might consider holding their positions, while potential investors should wait for a more favorable entry point. The regulatory landscape under President-elect Donald Trump adds further uncertainty, particularly around plans to reform pharmacy benefit managers (PBMs), which could adversely impact UnitedHealth’s OptumRx business. Investors should keep a close watch on upcoming earnings and regulatory developments to assess their implications for UnitedHealth’s performance and long-term prospects.7 Best Stocks for the Next 30 DaysJust released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers "Most Likely for Early Price Pops."Since 1988, the full list has beaten the market more than 2X over with an average gain of +24.1% per year. So be sure to give these hand picked 7 your immediate attention. See them now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report UnitedHealth Group Incorporated (UNH): Free Stock Analysis Report Humana Inc. (HUM): Free Stock Analysis Report Molina Healthcare, Inc (MOH): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks