UnitedHealth Group has hiked its 2016 earnings forecast again after its profit swelled 23 percent to nearly $2 billion in the third quarter, helped by gains both in and outside its core insurance business.
The nation's largest health insurer also voiced optimism about next year, when UnitedHealth will have a much smaller presence on the Affordable Care Act's public exchanges. Shares of the insurer soared close to an all-time high Tuesday.
UnitedHealth raised its earnings forecast for 2016 well above Wall Street expectations. It did the same in April.
The company now expects adjusted earnings of about $8 per share, 7 cents better than Wall Street is expecting, according to FactSet.
And it easily beat industry analyst profit projections for the most recent quarter, too.
Operating earnings jumped more than 10 percent to $2.1 billion for the company's UnitedHealthcare business, which sells insurance and runs Medicaid plans. The insurer added nearly a million customers through its employer-sponsored and individual coverage. Medicare Advantage membership grew 12 percent, and total enrollment topped 48 million in the quarter.
Health insurance is UnitedHealth's main business, but it also has been growing its Optum segment, which provides pharmacy benefits management and technology services and runs clinics and doctor's offices. Operating earnings from that segment surged 36 percent to $1.5 billion after jumping 46 percent in the second quarter.
Overall, UnitedHealth earned $1.97 billion on $46.29 billion in total revenue in the third quarter. Adjusted earnings totaled $2.17 per share.
Analysts forecast earnings of $2.08 per share, according to Zacks Investment Research.
UnitedHealth executives said Tuesday that they were comfortable so far with consensus Wall Street forecasts for next year. The company will offer a specific outlook late next month.
Analysts expect, on average, earnings of $9.12 per share in 2017. That implies about 14 percent growth from the insurer's forecast for this year.
UnitedHealth expects to be helped next year by stable medical costs, continued Optum growth and less exposure to the Affordable Care Act's public exchanges.
The insurer has said it expects to lose around $850 million this year from its ACA-compliant individual business, which is a small slice of its total operation. Next year, it plans to sell coverage on exchanges in only three states, down drastically from the 34 states it had operated in this year.
Other insurers also have struggled to develop that business, and defections from the exchanges are expected to hurt customer choice in many markets later this fall, when the enrollment period begins for 2017 plans.
Shares of UnitedHealth Group Inc., based in Minnetonka, Minnesota, jumped more than 6 percent, or $8.79, to $142.92 in midday trading. That moved the stock closer to an all-time high of $144.48 that it hit in July.
The insurer's shares had climbed 14 percent since the beginning of the year, as of Monday. That topped the Dow Jones Industrial Average, of which UnitedHealth is a component.
It also has outpaced the performance of other major insurers like Aetna Inc. and the Blue Cross-Blue Shield carrier Anthem Inc., which are both fighting federal regulators to close multi-billion dollar acquisitions.