UnitedHealth Group (UNH, Financial) reported its second quarter 2015 earnings results on July 16. The healthcare company reported revenue of $36.26 billion, net income of $1.6 billion and earnings per share of $1.64. The earnings results beat analysts’ expectations for revenue by $600 million and also beat earnings per share estimates by $0.05.
Year-over-year revenue growth for the company was strong, up 11.3% from $32.6 billion in the second quarter of 2014. Net income was also up year-over-year adding 13% with an earnings per share growth rate of 15%.
Total profit margin on net earnings was 4.37% up just slightly from 4.32% in the second quarter of 2014. Medical costs primarily drove the profit margin down. Medical costs for the quarter were $26 billion.
The firm operates within two main business segments, UnitedHealthcare and Optum. UnitedHealthcare is a healthcare benefits platform that provides healthcare benefit plans and healthcare service plans. Its revenue is derived from four categories, Employer and Individual, Medicare and Retirement, Community and State and Global. In the second quarter, the majority of UnitedHealthcare’s revenue was generated from its product offerings in Medicare and Retirement. The category accounted for 38% of revenue at $12.6 billion. Employer and Individual products followed at $11.9 billion or 36% of revenue. The company’s Community and State product offerings obtained the highest revenue growth rate from the previous quarter up 25% to $7.2 billion. Overall, UnitedHealthcare revenue was up 10% from the second quarter of 2014.
In Optum, revenue grew 16% from the second quarter of 2014. UnitedHealth’s Optum products touch nearly every aspect of the healthcare industry. Its revenue is divided amongst OptumHealth, OptumInsight and OptumRx. OptumRx accounted for the majority of the division’s revenue at 66% or $8.9 billion. OptumHealth followed at 25% of revenue totaling $3.4 billion. OptumHealth also posted the strongest revenue growth rate for the quarter at 32.9%. OptumInsight also contributed $1.4 billion to revenue helping the segment generate $13.6 billion in revenue overall.
In the healthcare industry UnitedHealth Group has been a leader in the modernization of healthcare administration. It has also worked to actively integrate its product offerings through healthcare exchanges associated with the Affordable Care Act. Its innovation and active involvement in the industry are central to its business model and should help it continue to maintain robust revenue growth rates in the future.
In the day following the company’s earnings announcement the stock was down 0.84% to $124.93. Year-to-date it is up 21.33%. The healthcare industry overall is up 12.92% for the year.
Recent investment manager trading activity in the stock has been minimal. However in the healthcare sector overall Ken Fisher (Trades, Portfolio) of Fisher Asset Management, LLC has been actively buying. In June, Fisher bought Magellan Health, Inc. (MGLN, Financial). During the month he also added significant portfolio holdings in Roche Holding AG (RHHBY, Financial), Select Medical Holdings Corp. (SEM, Financial) and Bayer AG (BAYRY, Financial).
