Earnings Outlook: UnitedHealth earnings: Insulated from Obamacare, Amazon and still going strong

The Affordable Care Act and a potential Amazon pharmacy entry are two of the biggest stories in health care today.

But don’t expect those factors to matter much for UnitedHealth Group Inc., considered a bellwether for the health-care sector, as it reports third-quarter earnings early Tuesday.

The health insurer UNH, -0.34%  exited most of the ACA’s, also known as Obamacare, exchanges this year, and the short-term insurance plans it sells are expected to benefit from a new executive order. And, although the company has a pharmacy-benefits manager unit called Optum Rx, the company should be mostly shielded from Amazon competition.

Optum Rx is part of a “Big Three” company with “owned physician practices, physician networks, integrated medical and Rx benefits and local market presence,” said Leerink Partners analyst Ana Gupte.

“AMZN could be a preferred partner that can boost market share but is less of a competitive threat even if a preferred partnership does not materialize,” she added.

And although the company started new leadership in September under now-Chief Executive David Wichmann, it’s on solid footing, most analysts believe.

UnitedHealth is in “the enviable position of having two growth engines, UHC (their managed care business) and Optum (their services business),” said Bernstein analyst Lance Wilkes.

Here’s what to expect:

Earnings: Analysts expect UnitedHealth to report earnings of $2.56 per share, up from $2.17 per share in the year-earlier period, according to FactSet. UnitedHealth has beaten the FactSet earnings consensus in all but one quarter over the last five years.

The software platform Estimize, which crowdsources estimates from buy-side and sell-side analysts, hedge funds, academics and others, has the company earning slightly more, $2.60 per share.

Read previous coverage: UnitedHealth Group earnings: After major Obamacare exit, expect a strong quarter

Revenue: Analysts expect UnitedHealth to report revenue of $50.3 billion, up from $46.3 billion in the year-earlier period, according to FactSet. UnitedHealth has beaten the FactSet earnings consensus in every quarter over the last three years.

Estimize has UnitedHealth earning slightly more, or $50.7 billion.

See: New CEO, no problems: UnitedHealth leadership transition praised by Wall Street analysts

Stock reaction: UnitedHealth shares have risen 5.1% over the last three months, compared with a 5.3% rise in the S&P 500 SPX, +0.18%  .

The company’s average rating is buy with a $210.95 price target, according to a FactSet poll of Wall Street analysts. All but two of 19 analysts surveyed by FactSet rate the company buy, with one overweight rating and one sell.

What to watch for: UnitedHealth is being sued by the Department of Justice, alleging that the company overcharged the government to insure individuals through its Medicare Advantage program.

One of the complaints was dismissed by a district judge earlier this month, though the judge will allow the Justice Department to bring an amended complaint. The move may reduce risk of a major settlement, said Mizuho analyst Sheryl Skolnick.

“In other words, DOJ missed big on its shot on goal, but it does get a do-over,” Skolnick said, adding that UnitedHealth will likely have a powerful defense case.

Related: UnitedHealth shares plunge 4%, but Wall Street analysts respond with a shrug

UnitedHealth is also in talks to buy Chilean health insurer Banmédica, according to news reports last month. If successful, the bid would expand UnitedHealth’s international business by 30%, according to Bernstein analyst Lance Wilkes, who added that international business could become another “leg” of the company’s stool.

“While still small and unproven from an earnings standpoint, we like the attributes that a scaled and profitable international expansion would provide for UNH,” Wilkes said.

The market could provide more revenue growth than managed care in the U.S., he said, and Wichmann could make “international growth a higher priority, given his long track record of acquisition expertise and direct experience with their Brazil operation.”

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