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Unitedhealth Stock Tumbles After Medicare Advantage Changes Hit Outlook
Updated at 6:36 AM EDT
UnitedHealth Group posted weaker-than-expected first-quarter earnings and lowered its full-year-profit guidance, sending shares in the country's biggest health insurance group sharply lower in early Thursday trading.
The Minnetonka, Minn., group's (UNH) adjusted Q1 earnings came in at $7.20 a share, a 1.7% increase from the year-earlier period but 9 cents shy of the Wall Street consensus forecast.
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Group revenue rose 9.5% to $109.6 billion, again missing analysts' consensus estimate of a $111.6 billion tally.
Optum revenue rose 4.6% from a year earlier to $63.9 billion. The division, which UnitedHealth purchased in 2011, is the main driver of the group's earnings. It's the nation's largest physician employer, with around 90,000 doctors under its wing.
UnitedHealth Group CEO Andrew Witty has faced pressure from lawmakers over the group's Medicare Advantage billing practices.UnitedHealth's medical-cost ratio, meanwhile, rose around 0.5 percentage point from a year earlier to 84.8%, suggesting that it paid out a larger portion of its collected premiums on insurance claims.
Overall premiums were up 11% to just under $78 billion in Q1, while medical costs rose 11.7% to $65.75 billion.
Related: UnitedHealth stock slides as Medicare Advantage concerns deepen
“UnitedHealth Group grew to serve more people more comprehensively but did not perform up to our expectations, and we are aggressively addressing those challenges to position us well for the years ahead, and return to our long-term earnings-growth rate target of 13% to 16%,” Chief Executive Andrew Witty said in a statement.
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The group also lowered its full-year profit forecast to between $24.65 and $25.15 per share, down from its early January estimate of between $29.50 and $30 per share.
UnitedHealth said the change reflected 'heightened care activity indications within UnitedHealthcare’s Medicare Advantage businesses" and "a greater-than-expected impact to current and new complex patients from the ongoing Medicare funding reductions enacted by the previous administration."
Shares of UNH, a Dow component, were marked 19.3% lower in premarket trading immediately following the earnings release to indicate an opening bell price of $472.01 each. That move would drag the stock into negative territory for the year.
