Image: UnitedHealth Group’s shares have been choppy the past couple years.
By Brian Nelson, CFA
UnitedHealth Group (UNH) reported mixed fourth quarter results on January 16 with revenue coming in a bit light of consensus and non-GAAP earnings per share beating what the Street was looking for. UnitedHealth Group’s 2024 revenues grew 8% year-over-year to $400.3 billion, while full year 2024 earnings from operations came in at $32.3 billion. Adjusted earnings from operations of $34.4 billion exclude cyberattack direct response costs and South American impacts.
The company’s full year medical care ratio was 85.5% compared to 83.2% in 2023. The higher medical care ratio was due to revenue effects of CMS’s Medicare funding restrictions, member mix, and the timing of Medicaid redeterminations. Increased hospital coding intensity and specialty medication prescribing continued at similar levels in the fourth quarter as that of the third quarter and are reflected in the company’s 2025 outlook. Its full year 2024 operating cost ratio came in at 13.2% compared to 14.7% in 2023.
UnitedHealth Group’s cash flows from operations for the full year were $24.2 billion, or 1.6 times net income. Capital expenditures for the full year 2024 were $3.5 billion, resulting in free cash flow of $20.7 billion, a very healthy number and well in excess of cash dividends paid of $7.5 billion for the year. During 2024, the company returned over $16 billion to shareholders through dividends and share buybacks. Return on equity was 23.7% in the fourth quarter.
UnitedHealth Group reaffirmed its outlook for 2025 that it established in December 2024. Revenues for 2025 are anticipated in the range of $450-$455 billion (the midpoint below consensus of $455.6 billion), net earnings are targeted in the range of $28.15-$28.65, and adjusted net earnings are expected in the range of $29.50-$30.00 per share (the midpoint below consensus of $29.86 per share). Cash flow from operations is anticipated to increase to the range of $32-$33 billion, up materially from 2024. We continue to like UnitedHealth’s growth potential and free cash flow generation, and the company remains a core holding in the Best Ideas Newsletter portfolio.
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Tickerized for UNH, HUM, CVS, ELV, CNC, MOH
Brian Nelson owns shares in SPY, SCHG, QQQ, QQQM, DIA, VOT, RSP, and IWM. Valuentum owns SPY, SCHG, QQQ, QQQM, VOO, and DIA. Brian Nelson’s household owns shares in HON, DIS, HAS, NKE, DIA, RSP, SCHG, QQQ, QQQM, and VOO. Some of the other securities written about in this article may be included in Valuentum’s simulated newsletter portfolios. Contact Valuentum for more information about its editorial policies.
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