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UnitedHealth stock jumps after insurer's profit more than doubles on a one-time tax gain

Key Points
  • UnitedHealth, the largest U.S. health insurer, reports profit that more than doubled from a year earlier.
  • The results were driven by a one-time tax benefit.
  • Total revenue rose to $52.06 billion from $47.54 billion.
UnitedHealth reports big earnings beat

UnitedHealth shares rose in premarket trading on Tuesday after the largest U.S. health insurer raised its outlook for 2018 earnings per share by more than 16 percent due to the U.S. corporate tax cuts and said it would speed up investments in data analytics and technology to better serve consumers.

The tax benefit also helped the company raise its 2018 full-year adjusted earnings per share forecast to range between $12.30 and $12.60.

UnitedHealth had forecasted in November that 2018 adjusted earnings per share would range between $10.55 and $10.85 on a revenue of $223 billion to $225 billion.

For the fourth quarter, UnitedHealth said Tuesday, it earned $2.59 per share, excluding items. Total revenue for the quarter rose 9.5 percent to $52.06 billion. Wall Street expected earnings of $2.51 per share on revenue of $51 billion, according to Thomson Reuters' consensus estimates.

"We think many investors were worried there could be greater reinvestment and other offsets limiting the tax benefit and we expect the market to react favorably to the updated guidance," Evercore ISI analyst Michael Newshel said in a research note.

Revenue from the company's Optum business, which manages drug benefits and offers health-care data analytics services, rose 10 percent to $24.39 billion.

"There's a dot that needs to be connected between tax policy and health policy," said Ana Gupte, a senior health-care services analyst at Leerink Partners. Gupte has an outperform rating on United stock with a price target of $260. In Tuesday's premarket, it was trading above $234.

"Because if a portion of it falls to the bottom line and a portion of it goes to the American consumer, you have Medicare now potentially getting from a third of American seniors to about 50 percent of American seniors before the 2020 elections," Gupte added in an interview on "Squawk Box."

The company, which sells employer-based insurance as well as Medicare and Medicaid, said net earnings attributable to shareholders rose to $3.62 billion, or $3.65 per share, in the fourth quarter ended Dec. 31, from $1.68 billion, or $1.74 per share, a year earlier.

"We enter 2018 with both growth momentum and opportunity as a result of our focus on improving the experience of those we serve, combined with actions taken to deepen our capabilities and presence in strategic markets," UnitedHealth CEO David Wichmann said in the earnings release.

The quarterly earnings included a one-time tax benefit of $1.21 per share, the company said.

—Reuters contributed to this report.