UnitedHealth: Q2 2024 Earnings Review, A Panacea For Investor's Fears

Core Insights - UnitedHealth Group reported Q2 2024 earnings with revenues of $98.9 billion, a year-on-year increase of approximately 6.5% [2] - The company’s share price rose over 5% following the earnings announcement, nearing its all-time high [2] - Adjusted earnings from operations were $8.7 billion, reflecting a 100 basis point improvement in net margin year-on-year [2] Financial Performance - Revenues for the quarter were just shy of $100 billion, with a GAAP basis revenue of $98.9 billion [2] - Earnings from operations on a GAAP basis were reported at $7.9 billion, down from $8.1 billion in Q2 2023 [2] - Cash flows from operations were $6.7 billion, representing 1.5 times net income [2] Cyberattack Impact - A cyberattack on Change Healthcare cost the company approximately $1.1 billion, with an estimated impact of $1.90 to $2.05 per share for the full year [4][5] - The attack led to a significant data breach affecting over 30% of Americans, raising concerns about security practices [4] - Management provided over $9 billion in loans and advance payments to support providers affected by the attack [4] South America Operations - UnitedHealth completed the sale of its larger Brazilian operations and plans to exit the South American market entirely [4] - The South American operations had a total impact of $1.28 per share, primarily due to foreign currency losses [4] - Management indicated that these impacts are considered one-off events and should not affect long-term outlook [4] Medicare Advantage Business - Medicare Advantage remains a key growth driver, with the company administering approximately 7.7 million plans [5] - The gross margins for Medicare Advantage plans are reported to be twice that of ordinary plans, presenting a significant opportunity [5] - The company added 10,000 Medicare Advantage members in Q2, with a total of 7.77 million members [6] Future Guidance - Guidance for 2024 net earnings was updated to a range of $15.95 to $16.4 per share, with adjusted earnings projected at $27.5 to $28 per share [2] - Management aims for a long-term growth target of 13-16%, although 2024 adjusted EPS guidance falls short of this target [4][5] - The company plans to recommence share buyback programs, indicating confidence in future performance [4][7] Market Outlook - Wall Street views UnitedHealth stock as undervalued post-earnings, with no further negative surprises anticipated [7] - The company’s performance in the Medicare Advantage sector is expected to influence its long-term growth trajectory [5][6] - UnitedHealth's debt is rated "AA-" by Standard and Poor's, reflecting a stable outlook and strong revenue growth expectations [7]