US healthcare company UnitedHealth Group reported on Tuesday an optimistic outlook for its profits next year.
The company mentioned that it expects to see profit growth rates of as much as 16 percent in 2020, far exceeding analysts' expectations of an 11 percent growth next year.
The country's largest health insurer also raised its forecast for its full 2019 earnings, the third time it has done so this year. The combination of its optimistic 2020 outlook and its forecast for the rest of the year resulted in positive sentiment from investors. This sent it stock prices up by as much as 8.6 percent following its statements.
UnitedHealth upgraded its full-year adjusted earnings forecast from an earlier expectation of $14.70 to $14.90 per share to $14.90 to $15 per share. For its third quarter, the company reported an earnings increase of $3.88 per share, beating initial analysts' estimate of only 13 cents per share.
The decision to upgrade its forecast was based on the firm's third-quarter performance. UnitedHealth reported a 4.7 percent increase in its health insurance business revenue to $48.11 billion. The company did report a slight drop in its medical care ratio, the percentage of premiums paid out for medical service. However, the 82.4 percent medical care ratio was still in line with average analysts' estimates.
The release of its better-than-expected third-quarter results also managed to lift other healthcare stocks in Wall Street. Healthcare stock such as CVS Health, Anthem, Molina, Cigna, and Centene all saw slight increases this week.
The company's chief executive officer, David Wichmann, mentioned during a conference call with analysts and investors that the company's forecasts are still "conservative" and that they do expect higher growth rates in the coming months.
Wichmann mentioned to investors that it does expect great performance from its Optum unit, which includes its pharmacy benefits management business. Revenue from its Optum unit had increased by 13.3 percent to $28.76 billion for the company's third quarter. The company also expects sales from its Medicare Advantage plans to propel its growth moving forward.
UnitedHealth's positive outlook comes as a major relief for the entire industry, which has been facing increased uncertainly given the upcoming 2020 presidential elections.
Some Democratic candidates have expressed their intention of eliminating private health insurance in favor of government health plans.
Due to the increased uncertainties and fears of increased scrutiny over healthcare costs, several healthcare companies have seen their stock plummet since the start of the year. UnitedHealth's stocks have fallen by around 11 percent since January.
