Earnings Preview: UnitedHealth reports on 3Q Tues

UnitedHealth Group Inc. has spoiled the surprise for investors by already stating that its third-quarter net income will top Wall Street expectations, but the nation's largest health insurer will release more details on Tuesday.

WHAT TO WATCH FOR: The Minnetonka, Minn., company said Oct. 8 that it expects third-quarter earnings to be at least $1.45 per share. That trumped analyst expectations at the time for about $1.26 per share.

The insurer also said it expects medical enrollment growth of more than 650,000 people in the quarter and that medical costs remained "well managed."

Relatively tame growth in health care costs has helped the performance of UnitedHealth and other major insurers for the past several quarters. Analysts point to a slow economy as a big factor behind this trend, as people put off medical care to save money.

UnitedHealth announced the results the same day it said it planned to take a big leap toward international growth by spending about $4.9 billion to buy a majority stake in Brazilian health benefits and care provider Amil Participacoes SA. The company is the largest health insurer in Brazil and also owns hospitals and clinics. UnitedHealth cited Brazil's growing economy and the potential for private health insurance growth in making the deal.

The acquisition adds another layer of diversity to a business portfolio that investors already like for its variety. Health insurance is UnitedHealth's largest business, but it also operates segments that sell information technology services and pharmacy benefits management.

UnitedHealth also is the largest provider of Medicare Advantage plans, which are privately run versions of the government's Medicare program for the elderly and disabled people. Company officials have said they expect steady growth in this coverage.

In July, UnitedHealth raised its estimate for full-year earnings to between $4.90 and $5 per share, up from a prior estimate of between $4.80 and $4.95 per share. Investors may see another update on that forecast Tuesday, and they also may gain some sense from company officials about variables that will affect the insurer's 2013 performance.

WHY IT MATTERS: UnitedHealth is the largest U.S. health insurer and the first to announce earnings every quarter. Many analysts and investors see it as a bellwether for the managed care sector.

Aetna Inc., the third largest insurer, reports results on Oct. 25, followed by Cigna Corp. on Nov. 1 and Humana Inc. on Nov. 5. The second-largest insurer, WellPoint Inc., then will wrap up reporting for the five biggest managed care companies when it releases results Nov. 7.

WHAT'S EXPECTED: Analysts surveyed by FactSet now expect, on average, earnings of $1.34 per share on $27.58 billion in revenue.

LAST YEAR'S QUARTER: UnitedHealth reported earnings of $1.27 billion, or $1.17 per share, on $25.28 billion in revenue for 2011's third quarter. The earnings beat analyst expectations, like UnitedHealth typically does.

But the insurer's stock slipped the day it reported results, as it also warned investors of challenges like high unemployment rates and growing health care use that were expected to squeeze the company's 2012 performance.