UnitedHealth Group Incorporated (UNHFree Report) reported third-quarter 2021 earnings of $4.52 per share, which outpaced the Zacks Consensus Estimate by 2.5%. The bottom line increased 28.8% year over year on revenue growth.

Revenues of $72.3 billion climbed 11% year over year driven by revenue growth at both the business units — UnitedHealthcare and Optum. The top line beat the Zacks Consensus Estimate by 1.1%.

Medical care ratio of 83 deteriorated 110 basis points (bps) year over year primarily due to the repeal of the health insurance tax.

Operating cost ratio of 14.8 improved 80 bps year over year, driven by business mix and growth and innovation investments.

Total operating costs for the third quarter escalated 10.2% year over year to $66.6 billion due to increased medical and operating costs, and a rise in depreciation and amortization.

Segmental Performances

UnitedHealthcare generated revenues of $55.9 billion in the quarter. The year-over-year revenue growth of 11% was driven by an increase in the number of people served through the segment’s community and senior offerings.

Earnings from operations improved 28.6% year over year to $2.7 billion, driven by strong member growth, reduced net COVID-19 effects and a continued focus on operating cost management.

Revenues at Optum improved 13.9% year over year to $39.8 billion on the back of solid contributions from the sub-segments of OptumHealth (up 31.6%), OptumInsight (up 13.4%) and OptumRx (up 5.7%). Earnings from operations of $2.6 billion rose 18.5% year over year in the third quarter.

OptumHealth continued to perform well, courtesy of a higher number of people being catered to in value-based care arrangements and growing affiliated physicians. While OptumInsight revenues improved on growth in comprehensive managed services, OptumRx gained from higher script volumes.

Increase in Membership

The company served 50.4 million people in the quarter, up 1.6% year over year owing to increased member enrollment in the Community and Senior business, and Commercial business.

Mixed Financial Position

The company exited the third quarter with cash and short-term investments of $23.9 billion, up from $19.8 million at the 2020-end level.

As of Sep 30, 2021, long-term debt of $43.3 billion increased from $38.6 million at 2020 end.

Debt to total capital came in at 40.1% at the third-quarter end, which improved 80 bps year over year.

Return on equity was 23.5% in the quarter.

Decline in Cash Flows

Cash flow from operations in the first nine months totaled $19.1 billion, up nearly 19% year over year.

Share Repurchase and Dividend Update

The company returned $1.4 billion to shareholders in the reported quarter via an increase of 16% in the annual dividend rate from the year-ago quarter as well as $1.1 billion worth of share buyback.

2021 EPS Guidance Raised

The company revised its earnings outlook for 2021.

Net earnings per share are now expected between $17.70-$17.95, higher than the prior guidance of $17.35-$17.85.

Adjusted earnings are projected in the range of $18.65-$18.90 per share, up from the previous estimate of $18.30-$18.80.

Zacks Rank

UnitedHealth Group currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Upcoming Release

Anthem (ANTMFree Report) is set to report third-quarter 2021 results on Oct 20. The Zacks Consensus Estimate for third-quarter earnings is pegged at $6.38, suggesting a 51.9% rise from the year-ago reported figure.

Molina Healthcare (MOHFree Report) is set to report third-quarter 2021 results on Oct 27. The Zacks Consensus Estimate for third-quarter earnings is pegged at $2.76, indicating a 17.9% decline from the year-ago reported figure.

Centene Corporation (CNCFree Report) is set to report third-quarter 2021 results on Oct 26. The Zacks Consensus Estimate for third-quarter earnings is pegged at $1.29, calling for 2.4% growth from a year ago.

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