UnitedHealth Keeps Optum-izing Its Growth Opportunities

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Health-insurance giant UnitedHealth Group has been a huge winner for shareholders over the past several years, with its stock having doubled since mid-2013 as the company responded well to the changing demands of healthcare reform. Coming into Thursday morning's second-quarter financial report, UnitedHealth investors had high hopes that the company would continue to drive growth through its multiple lines of business, which include not only traditional insurance but also a wide range of related health services. UnitedHealth delivered solid results on all fronts, with particularly impressive gains in its Optum health-services unit contributing to a bullish attitude from investors. Let's look more closely at how UnitedHealth has kept on top of its game and what's ahead for the future.

How UnitedHealth continues to dominate UnitedHealth's efforts have paid off with huge growth in both sales and net income. Revenue jumped 11% from the year-ago quarter to $36.3 billion, easily topping the 9.5% growth rate that most investors had expected to see from the health-insurance company. Earnings came in at $1.64 per share, beating the consensus projection by a nickel and reflecting the nearly 13% rise in net income to $1.585 billion.

A closer look at UnitedHealth's results shows just how valuable the company's Optum health-services unit has been in producing great performance. Revenue from Optum soared 16% to $13.6 billion, which was much faster than the 10% growth that the larger UnitedHealthcare division experienced. Optum also generated better gains in operating earnings and had better margins than its insurance-focused counterpart. In particular, the OptumHealth and OptumRx units contributed the most toward the division's overall growth, while in the UnitedHealthcare segment, double-digit percentage growth in the Community & State and Employer & Individual divisions helped offset further currency-driven weakness from its Global category.

UnitedHealth has kept seeing its customer base grow as well. The company served 101.9 million people as of the end of the quarter, up from just 88.1 million a year ago. Even just considering the UnitedHealthcare division, the health-insurance giant served 1.6 million more people in its domestic operations than it did in mid-2014.

UnitedHealth's management touted its strength. As CEO Stephen Hemsley said, "We are seeing consistent growth in response to our continuing focus on improving the ways we serve people and the healthcare system as a whole." By keeping costs down and making information more available to its customers, UnitedHealth is making the most of the current environment.

More to come from UnitedHealthYet even its past success hasn't slowed down UnitedHealth's efforts to keep growing. With its acquisition of Catamaran expected to close this month, UnitedHealth will have an even bigger presence in the pharmacy-benefit management arena, which has grown increasingly important in recent years as a way to hold overall costs down and boost profitability. UnitedHealth updated its results to reflect the acquisition, now believing it will earn between $6.25 and $6.35 per share in 2015 on revenue of $154 billion. The sales estimate is $11 billion higher than UnitedHealth's last guidance, and a boost of $0.05 to $0.10 per share on the earnings front is also good news for shareholders.

Perhaps the only question facing UnitedHealth is whether its global aspirations will pan out the way the company had hoped. Revenue for UnitedHealthcare Global fell 18% from the year-ago quarter, but on a currency-neutral basis, sales climbed 13%. Nevertheless, with the global division seeing a drop of 345,000 in people served during the first half of 2015, the company will need to clarify its strategy overseas in order to convince shareholders that it is still committed to looking beyond the U.S. for future growth.

Somewhat surprisingly, traders in UnitedHealth didn't make a big deal of the results, with the stock actually trading very slightly lower in the first couple of hours of pre-market trading following the announcement. Still, UnitedHealth remains on track to realize its potential and to take maximum advantage of all the changes in the healthcare field in recent years, and its latest results only highlight its success thus far.

The article UnitedHealth Keeps Optum-izing Its Growth Opportunities originally appeared on Fool.com.

Dan Caplinger has no position in any stocks mentioned. The Motley Fool recommends UnitedHealth Group. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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