Earnings season has been a mixed bag for the market’s biggest stocks so far, with some major companies reporting stellar results while others have endured the wrath of disappointed investors. UnitedHealth Group Inc. (NYSE:UNH) had the chance to make its own mark today by chalking up a success in its first reported quarter of the year. Let’s see just how America’s biggest health insurer fared.
Falling profit, beating expectations
Analysts had expected the company’s profit to fall from a year ago. Earnings projections averaged an estimate of $1.14 per share going into today.
Wall Street walked away satisfied, then, as UnitedHealth topped those estimates with earnings of $1.16 for the quarter. That’s still a significant fall from last year’s quarter, when the company produced earnings of $1.31 per share, and total net profit declined to $1.2 billion from $1.4 billion a year ago. On a brighter note, however, the firm’s revenue jumped by more than 10%, rising to $30.3 billion from $27.3 billion.
Unfortunately, investors haven’t been so happy with UnitedHealth Group Inc. (NYSE:UNH)’s earnings decline, even though the company’s bottom line topped analyst projections. Shares of the insurer have plummeted more than 3.3% in early trading.
Part of that negativity is due to UnitedHealth’s downbeat expectations for the rest of the year, as the company announced it expects less revenue over the full year in 2013 — projecting $122 billion in revenue overall, down from earlier estimates of between $123 billion and $124 billion. A major company client moved into a self-funded format, a move that Unitedhealth says will negatively impact its top line. Analysts expect $123.8 billion in full-year revenue and $5.51 in earnings per share, so UnitedHealth’s gloom could be setting investors up for disappointment.
UnitedHealth Group Inc. (NYSE:UNH) expects full-year earnings that could easily miss analyst projections as well, projecting between $5.25 and $5.50 per-share earnings in 2013. Rising prices from medical services and doctors’ operations have added to the company’s costs, and health care reform has forced the firm to provide more services in order to comply with the legislation.
Obamacare on the horizon
Implementation of the Patient Protection and Affordable Care Act, commonly referred to as Obamacare, next year could add even more headaches for the company: While the legislation will force tens of millions of Americans to find insurance, UnitedHealth Group Inc. (NYSE:UNH) could see its costs from these newly insured members rise significantly if hospital and doctor prices continue surging. A health insurance premium tax, also part of the Affordable Care Act meant to help pay for the legislation, won’t help matters across the industry.
While investors may be fretting today about the company’s earnings, savvy shareholders should keep their eyes firmly on health care reform. UnitedHealth’s still managing to grow its membership rolls at a steady pace and boost revenue, but Obamacare’s massive reform will shake up the company and the insurance industry in a way previously unseen. No company is as better poised to handle the Affordable Care Act as UnitedHealth Group Inc. (NYSE:UNH) due to its size and position atop the insurance industry, but don’t expect the firm to walk away unchanged by reform.
The article Could Obamacare Impact UnitedHealth’s Earnings? originally appeared on Fool.com and is written by Dan Carroll.
Fool contributor Dan Carroll has no position in any stocks mentioned. The Motley Fool recommends UnitedHealth Group.
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