The 2013 forecast for EPS is below the consensus estimate of $5.58, while the revenue forecast is higher than the consensus estimate of $119.12 billion.
Although the announcement contained no details, a couple of things could be happening here. In UnitedHealth’s most recent quarter, the company reported that benefit payouts had fallen and that margins had improved by 9.6%. If forecast revenue is as high as UnitedHealth thinks it will be, then margins seem set to shrink in 2013.
Another issue could be costs. As the company gets set for the 2014 introduction of Obamacare’s mandatory medical insurance and the state exchanges that will be available, UnitedHealth may be looking at boosting its promotional costs to get new business from the 30 million or so Americans who currently do not purchase health insurance. That pool is a veritable gold-mine for insurers like UnitedHealth, WellPoint Inc. (NYSE: WLP), Cigna Corp. (NYSE: CI) and others, provided they can get new customers to sign up.
What this appears to add up to is more premiums resulting in higher revenues but lower profits because more sick people will be signing up. And if this is the case with UnitedHealth, it also is likely to be the case at other insurers.
UnitedHealth’s shares are down about 1.5% this morning, at $53.12 in a 52-week range of $43.47 to $60.75.
Paul Ausick
Sponsored: Want to Retire Early? Here’s a Great First Step
Want retirement to come a few years earlier than you’d planned? Orare you ready to retire now, but want an extra set of eyes on your finances?
Now you can speak with up to 3 financial experts in your area for FREE. By simply clicking here you can begin to match with financial professionals who can help you build your plan to retire early. And the best part? The first conversation with them is free.
Click here to match with up to 3 financial pros who would be excited to help you make financial decisions.
Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.