Health insurance stocks have been on a tear since managed care company
UnitedHealth Group
last reported earnings in mid-July.
UnitedHealth
‘s shares (ticker: UNH) are up 17%, and the
S&P 500 Managed Health Care
sub-industry index is up 15%. The
S&P 500
is down 3% over the same period.
When the company reports third-quarter earnings on Friday, investors will see whether UnitedHealth, and the managed care subsector at large, can keep that run going. UnitedHealth is among the first major healthcare companies to report earnings each quarter, and its results and guidance often serve as a bellwether for the industry.
Wall Street analysts expect the company to report earnings of $6.32 for the third quarter, up from $5.79 in the same quarter last year, according to FactSet.
In July, investors went into UnitedHealth’s second quarter earnings worried that high utilization in its Medicare Advantage business would pull down the company’s performance. Instead, earnings for the second quarter came in well ahead of estimates, and the company’s medical loss ratio—a closely-watched number that reflects the proportion of healthcare premiums paid out to cover medical expenses—was in-line with analyst expectations.
The second quarter medical loss ratio was 83.2%, higher than the 81.% in the same quarter last year, but not as high as investors had feared. Analysts expect the medical loss ratio to drop to 82.8% in the third quarter, according to FactSet.
Investors also will be listening for any hints executives might drop about the company’s expectations for 2024.
The earnings come amid an investor frenzy over the potential impact of the new GLP-1 obesity drugs, with each day bringing a surge of worries about the drugs’ impact on some particular sector that drives a round of selloffs. UnitedHealth executives will more than likely face questions about their thinking on the GLP-1s, and how their plans will handle paying for the drugs.
Executives could also see questions about their pharmacy benefit manager, OptumRx, amid increasing challenges to the PBM business model. In mid-August, shares of a number of insurers dropped as one regional nonprofit insurance company said it would largely stop using a PBM.
UnitedHealth shares are down 1.1% this year. The company has scheduled an investor call for 8:45 a.m. on Friday.
Write to Josh Nathan-Kazis at [email protected]
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