By Sarah Toy
Uncertainty about possible regulatory changes in the health care system are putting pressure on stocks
UnitedHealth Group Inc. raised its full-year profit outlook on Thursday after reporting ( ) second-quarter earnings that topped Wall Street expectations.
But that didn't stop the stock from falling 2.3% in Thursday afternoon trade.
The dip is faint echo of investors' response to last quarter's earnings (), when fears around "Medicare for all" sent UnitedHealth shares spiraling more than 5% even after the company beat Wall Street expectations and raised its full-year guidance.
The parent of the largest health insurer in the U.S. (UNH) raised its full-year earnings per share guidance to $13.95 to $14.15 from the prior guidance of $13.80 to $14.05. Full-year adjusted earnings per share is now expected to range from $14.70 to $14.90, up from its previous forecast of $14.50 to $14.75.
Profit for the latest quarter rose 13% to $3.293 billion, or $3.42 a share, compared with $2.922 billion, or $2.98 a share, a year ago. Adjusted earnings per share was $3.60 a share. Analysts polled by FactSet had expected of $3.45 a share.
Revenue rose 8% to $60.595 billion from $56.086 billion the year before, driven by strong growth in OptumRx, OptumHealth and UnitedHealthcare's Medicare-and-retirement segment. Sales from the company's Medicare-and-retirement unit rose 10.6% to $20.9 billion, while sales from the company's pharmacy-benefit manager OptumRx grew 11.7% to $18.9 billion. OptumHealth revenue grew 20.3% to $6.1 billion, with the average revenue per consumer increasing 17% year-over-year.
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UnitedHealth's earnings results come at a time of uncertainty in health care. Twenty state attorneys are challenging the Affordable Care Act's constitutionality, and change could be coming for drug pricing. The Trump administration issued an executive order in June that requires insurers and health providers to disclose information about negotiated prices (), and it is also considering issuing an executive order allowing the U.S. to buy drugs based on the lowest price paid by other countries ( ). In May, the House Ways and Means Committee unveiled draft legislation ( ) that would shift the risk of catastrophic coverage from patients and the federal government -- which covers 80% of catastrophic-stage drug costs -- to health plans and manufacturers.
Read: This would be the worst-case scenario for health stocks, according to UBS ()
"There are a lot of policies and proposals and proposed regulation activity going on today and it's in part mixed with the political campaign," UnitedHealth Chief Executive Dave Wichmann said during a call with analysts Thursday morning. He declined to comment specifically on the draft legislation but highlighted the company's policy of requiring employer clients to pass rebates on to patients (), announced in March.
"We've begun bringing really strong value to people through this application of rebates at the point-of-sale," he said.
Health-care stocks can get bumpy during election seasons, history shows. But analysts are standing by UnitedHealth. "This is a welcome clean beat and raise to kick off earnings season," Evercore ISI analyst Michael Newshel wrote in a note to clients Thursday morning.
Shares of UnitedHealth have gained 4.6% in the year to date through Wednesday, while the S&P 500 has gained 19% and the Dow Jones Industrial Average has gained 16.7%.
Read: S&P 500 on verge of marking longest string of losses in July as trade worries weigh ()
-Sarah Toy; 415-439-6400; AskNewswires@dowjones.com
(END) Dow Jones Newswires
July 18, 2019 12:59 ET (16:59 GMT)
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