U.S. insurer UnitedHealth Group Inc (UNH.N) reported a higher-than-expected quarterly profit on Tuesday, but said Wall Street should not be too optimistic given the weak economy and government efforts to rein in a growing deficit.
"We expect to grow revenues and earnings per share in 2013," Chief Executive Officer Stephen Hemsley said at the beginning of a conference call with analysts. He warned, however, that the largest U.S. health insurer faced "a considerable challenge" in meeting analysts' estimates for next year, given market conditions.
Analysts on average expect 2013 earnings of $5.60 per share, which would be up 6.7 percent to 7.7 percent from the company's latest forecast for 2012.
The U.S. fiscal cliff - about $600 billion in looming tax hikes and automatic spending cuts - is one problem, Hemsley said.
"Clearly we are focusing on its potential impact on government programs and so forth, but there is nothing we can actually specifically do," he said. "But it is a good reason why we are staying more cautious than perhaps the marketplace."
The company's shares, which had initially fallen on his remarks, later edged higher, but were unchanged at $57.49 at midday.
The stock's zigzag is typical for the company, even when it beats analysts' expectations.
The CEO uses the call to set the tone for the next year and is not as pessimistic as he was a year ago, said CRT Capital Group analyst Sheryl Skolnick.
"They are just being their usual cautious selves," she said. "There is good reason to be cautious."
For the third quarter, UnitedHealth reported a 23 percent rise in earnings, helped by higher enrollment and reduced spending, and the company raised its full-year forecast.
Net income rose to $1.56 billion, or $1.50 per share, from $1.27 billion, or $1.17 per share, a year earlier. On October 8, UnitedHealth said it was expecting earnings of at least $1.45 per share.
Revenue rose 8 percent to $27.3 billion as the company enrolled an additional 670,000 people in its health plans, above its estimate of more than 650,000. UnitedHealth said business from the U.S. government's Medicaid and Medicare programs had helped increase revenue.
At $1.50 per share, the earnings were about 25 cents higher than what analysts had been expecting before the company gave its $1.45-per-share estimate last week, according to Leerink Swann analyst Jason Gurda.
The earnings increase reflected both growth from operations and a gain of about 10 cents per share from reserves to cover medical claims, he said. When claims come in lower than forecast, companies can recognize financial gains.
The company said it would provide more information about its 2013 outlook at an investor meeting in November.
BOOST FROM MEDICARE, MEDICAID
Revenue from the Medicare program for the elderly and UnitedHealth's retirement products increased 13 percent to $10 billion, helped by acquisitions and internal growth, the company said.
At UnitedHealth's business that includes the Medicaid program for the poor, revenue rose 12 percent to $3.9 billion as enrollment increased by 70,000 people.
Revenue at the largest business, employer and individual plans for which the company administers services, increased 2 percent to $11.6 billion.
In businesses other than healthcare plans, revenue increased in services and technology, but fell for the pharmacy operations due to lower prescription volumes. Overall revenue for the group was $7.2 billion, about flat from a year earlier.
The company spent 79 percent of its premiums on medical claims during the quarter, which it said was 170 basis points lower than a year earlier.
Americans' low use of healthcare services due to a weak economy and high unemployment rate has been a boon for insurers over the past two years as it reduced medical claims costs.
UnitedHealth raised its 2012 profit forecast to a range of $5.20 to $5.25 per share from an earlier outlook of $4.90 to $5.00. Analysts on average had been expecting $5.12 per share, according to Thomson Reuters I/B/E/S.
(Reporting by Caroline Humer in New York; Editing by Michele Gershberg, Lisa Von Ahn and Maureen Bavdek)