CVH Coventry Health Care, Inc.

UnitedHealth Group Inc. (UNH) reported its first-quarter 2013 earnings of $1.16 per share, in line with the Zacks Consensus Estimate. Earnings, however, declined 11.4% on a year-over-year basis.

UnitedHealth posted revenues of $30.3 billion, up 11.2% year over year and was almost in line with the Zacks Consensus Estimate. The year-over-year increase was an outcome of broad-based organic growth and business expansion in both health care benefits and health care services.

During the quarter, UnitedHealth’s medical costs increased 13.2% year over year to $22.6 billion. Total operating costs increased nearly 13% year over year to $28.2 billion.

Segment performance

During the reported quarter, UnitedHealth’s health benefits segment – UnitedHealthcare – witnessed revenue growth of 11.0% year over year to $28.3 billion. Earnings from operations, however, declined 23.8% to $1.6 billion.

Revenue from the company’s other segment – the health services segment branded as Optum – improved 15% to $8.4 billion on a year-over-year basis. Earnings from operations, however, surged 96% year over year to $495 million. Continued progress on Optum’s plan to accelerate growth and improve margins and productivity by strengthening integration and business alignment aided the improvement.

Membership Enrollment

UnitedHealth had 42.0 million members in its enrollment at the end of the quarter, up 6.445 million year over year.

Other Highlights

UnitedHealthcare implemented the new TRICARE military health care award from Apr 1, 2013. It added 2.9 million military market beneficiaries.

The first 3 million new and migrating UnitedHealthcare commercial consumers moved successfully to pharmacy benefit manager OptumRx.

Capital Position

Cash flow from operations was $1.1 billion in the quarter, in line with the prior-year quarter. Management continues to expect cash flow from operations to exceed 130% of net earnings on a full year basis.

On a year-over-year basis, first-quarter 2013 days sales outstanding in accounts receivable of 9.5 days and days claims payable of 47 days both increased by one day.

Cash and short-term investments increased 14.2% to $13.1 million at first-quarter end from 2012-end level.

Long-term debt increased 11.5% from 2012-end level to $15.6 million at first quarter 2013-end.

Share Repurchases and Dividend

UnitedHealth Group spent $543 million to buyback 10 million shares in the first quarter. The company paid $216 million in dividends to shareholders.

2013 Guidance

UnitedHealth expects to generate $122 billion in revenue, an increase of nearly 10% from 2012 level. However, this is lower than revenue of $123–$124 million guided earlier.

Net earnings are still expected between $5.25 and $5.50 per share.

Zacks Rank

UnitedHealth currently carries a Zacks Rank #3 (Hold). Healthcare providers Health Net, Inc. (HNT) with Zacks Rank #1 (Strong Buy) is scheduled to release its first-quarter earnings on Apr 29, while Coventry Health Care Inc. (CVH) and WellCare Health Plans, Inc. (WCG) with a Zacks Rank #2 (Buy) are slated to announce their results on Apr 22 and May 3, respectively.
 

 
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