Shares of UnitedHealth (UNH) are under pressure on Tuesday despite reporting better than expected quarterly results, dragging other healthcare stocks into negative territory as well. Acknowledging the company's "solid" first quarter earnings, JPMorgan analyst Gary Taylor questioned whether the beat and modest guidance raise will be enough to change the negative public sentiment that has pressured both the stock and the group year-to-date. Meanwhile, his peer at Credit Suisse added that the company is setting a positive tone with a clean "beat and raise quarter."
QUARTERLY RESULTS: On Tuesday, UnitedHealth reported first quarter adjusted earnings per share of $3.73 and revenue of $60.3B, both above analysts' consensus estimates of $3.59 and $59.71B, respectively. The company also raised its fiscal year 2019 adjusted earnings per share view to $14.50-$14.75 from $14.40-$14.70, and said it sees "sustained growth" this year, in fiscal year 2020 and "beyond." "Our employees' shared vision of improving the health of the people we serve and the performance of health systems for everyone is producing value for society and driving consistent growth for our businesses," said UnitedHealth Chief Executive Officer David Wichmann.
The chief executive also criticized the "Medicare for All" proposals being debated by Democrats, making UnitedHealth the first major health insurer to openly discuss the proposal. On the company's quarterly earnings conference call, Wichmann warned that Medicare for All would "destabilize" the nation's health system and limit the ability of clinicians to practice medicine "at their best." Moreover, he feels Medicare for All would have a "severe" impact on the economy and jobs, "all without fundamentally increasing access to care." The CEO argued that the best path forward is to achieve universal coverage, which he said could be substantially reached through existing public and private platforms.
SETTING POSITIVE TONE: Commenting on the company's earnings results, Credit Suisse analyst A.J. Rice said UnitedHealth is setting a positive tone with a clean "beat and raise quarter." The analyst reiterated an Outperform rating and a $310 price target on the shares. Voicing a similar opinion, Raymond James analyst John Ransom also pointed out that the company started the earnings season off "right" with its beat and raise, and reiterated a Strong Buy rating on the shares.
Meanwhile, JPMorgan's Taylor called UnitedHealth's first quarter report "solid," with a 3.6% earnings per share beat on 1% revenue upside versus consensus, but noted that the Medical Loss Ratio, or MLR, beat was "unexpected" given upward pressure from the 2019 HIF Holiday and nearly four times faster government vs. commercial premium growth. Taylor also questioned whether the beat and modest raise will be enough to change the negative public sentiment that has pressured both the stock and the group year-to-date.
PRICE ACTION: In afternoon trading, shares of UnitedHealth have dropped almost 5% to $218.71. Anthem (ANTM), Humana (HUM), Cigna (CI) and hospitals Healthcare (HCA) and Community Health Systems (CYH) are also sliding.