UnitedHealth Group's ( UNH) pulse is racing. The powerful health insurer once again sped past Wall Street expectations when reporting another record quarter on Thursday. The company posted second-quarter profits of 93 cents a share -- beating the consensus estimate by a penny -- despite soft enrollment numbers in certain business segments. It also raised its earnings forecast for the full year to between $3.79 and $3.82 a share, excluding any gains from its upcoming purchase of Oxford Health ( OHP). Analysts, on average, were previously anticipating that 2004 profits would fall at the low point of that range. Even Goldman Sachs analyst Matthew Borsch -- who has a cautious view on the sector -- called the company's latest results "mostly strong and solid." He did, however, expect higher enrollment growth and profit margins from a couple of business units. For example, Borsch pointed out, enrollment in the company's Uniprise division -- a health benefits administrator for large employers -- fell by 90,000 sequentially. Borsch also expected higher revenue from the company's commercial risk business even though it reported "modest" enrollment growth instead of the decline he had anticipated. Still, the market -- like Borsch himself -- was generally happy with the results. Investors pushed shares of the big health insurer up 3.5% to $64.05 late Thursday morning.
"People don't realize the catastrophic edge our health care system is teetering on," he insisted on Tuesday. "We ... have a system that is really hurting the patients it's supposed to be covering -- and all for the sake of earnings, earnings, earnings." Whatever the case may be, the system works for UnitedHealth. In the latest quarter, the company's revenue surged 23% -- slightly better than expected -- to $8.7 billion. Earnings per share jumped 31%, and net income climbed an even higher 36% to $596 million. Cash flow rocketed 33%, topping $1 billion, and was singled out as a particular strength in Borsch's early morning report. As a major industry leader -- and the first in the sector to report earnings -- UnitedHealth is closely watched by health insurance investors. The company's latest results indicate that, at least for now, the sector's long roll is continuing. But Borsch has been warning for months that a downturn is actually under way.
Critics of the industry hope the system does break down. Linda Peeno, a physician who once worked for managed care provider Humana ( HUM), offered some startling revelations in a book called Making Them Pay three years ago. In testimony before California lawmakers, the book states, Peeno told California lawmakers about winning praise from her employer for discovering a way to deny an expensive -- but life-saving -- heart transplant and then ending her managed care career shortly afterwards. "Once I stamped 'DENIAL' on that man's form," Dr. Peeno told the California State Assembly, according to the book, "his life's end was as certain as if I had pulled a plug on his ventilator. And if I knew his name, it was only for a fleeting second. I remember the details only because of the accolades it brought me from my employer." Miller, for one, is disgusted. "When you put all this together with earnings season, it flat out makes you sick. These companies are ... denying rightful benefits, killing patients and then parading down Wall Street like white knights. It's wrong," he declared. "It's just plain wrong." Some believe that upcoming political elections could have a particularly strong impact on companies like UnitedHealth. They view Republicans as friendly and Democrats -- including likely presidential nominee John Kerry -- as frosty to the industry. For now, however, the long rally continues. At least two other health insurers -- PacifiCare Health ( PHS) and takeover target Oxford -- jumped Thursday on UnitedHealth's healthy results.