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UnitedHealth Forecasts Profit Below Analyst Estimates

Updated on

UnitedHealth Group Inc., the biggest U.S. health insurer, provided a forecast for profit next year that was below analyst estimates as the company prepares for a poor business environment and reductions in government revenue.

Earnings in 2013 will be $5.25 to $5.50 a share, while revenue will be $123 billion to $124 billion, the Minnetonka, Minnesota-based company said today in a regulatory filing. Analysts had anticipated $5.58 a share and $119.4 billion, based on the average estimates compiled by Bloomberg. UnitedHealth will hold its annual investor conference tomorrow.

Chief Executive Officer Stephen Hemsley said on Oct. 16 that analysts’ predictions for next year appeared optimistic, given the “weak business climate and employment outlook.” Government cuts may also slow revenue growth from Medicaid plans for the poor and Medicare for the elderly, he said. The programs have helped lead a surge in enrollment this year.

“Because of cost trends, they’re overly conservative on what they think they’ll come in at,” said Ana Gupte, a Sanford C. Bernstein & Co. analyst in New York, in a telephone interview. “The revenue guidance was pretty strong.”

Shares Decline

UnitedHealth fell less than 1 percent to $53.53 at the close of New York trading. The shares have risen 23 percent in the past 12 months.

“We still believe that UNH’s outstanding execution and strategic positioning can lead it to exceed this initial 2013 guidance range,” Sheryl Skolnick, an analyst at CRT Capital Group in Stamford, Connecticut, said in a note to clients.

CRT lowered its estimate for UnitedHealth’s earnings to $5.54 a share from $5.70 and raised its revenue estimate to $123 billion from $121 billion.

UnitedHealth reaffirmed its 2012 earnings forecast of $5.20 to $5.25 a share in today’s statement.

Last month, UnitedHealth raised this year’s forecast after reporting that enrollment in its Medicare and Medicaid plans surged in the third quarter and medical costs stayed stable. It was the third time this year the company increased the 2012 outlook. UnitedHealth added 2.1 million customers to its medical plans from a year earlier, and the share of customer premiums spent on health care dropped.

Cigna Corp., the third-biggest U.S. health insurer, today reaffirmed its profit forecasts for this year and 2013. The shares of the Bloomfield, Connecticut-based company fell 1 percent to $52.24.

UnitedHealth on Oct. 8 agreed to pay about $4.9 billion to buy 90 percent of Amil Participacoes SA, a Brazilian insurer and hospital chain.

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