UnitedHealth (UNH) hiked its 2016 forecast after the nation's largest health insurer topped Wall Street's first-quarter earnings expectations.
The Minnetonka, Minnesota, company now expects annual adjusted earnings ranging from $7.75 to $7.95 per share. That's up 15 cents from when it last reaffirmed its outlook in January.
Analysts had been projecting earnings of $7.73 per share, according to FactSet.
UnitedHealth's burgeoning Optum segment bolstered results in the first quarter with 54 percent revenue growth. Health insurance is UnitedHealth's main business, but it has been focusing more on its Optum business, which provides pharmacy benefits management and technology services and also operates clinics and doctor's offices.
UnitedHealth pulled in nearly $20 billion in revenue from Optum, helped by the acquisition of pharmacy benefits manager Catamaran Corp.
An extra calendar day in this year's quarter and hits from UnitedHealth's public insurance exchange business created a drag on the company's commercial health insurance business, which reported operating earnings of $1.9 billion that were roughly even with last year
UnitedHealth has estimated that it could lose as much as $475 million on its public exchange business this year and is trying to figure out whether it will participate in that market in 2017. The state-based exchanges are a key element behind the Affordable Care Act's push to expand insurance coverage.
UnitedHealth grew fast in the ACA exchanges and sells coverage in 34 states this year, but it has already decided to pull out of Arkansas, Georgia and Michigan in 2017.
The exchange business and individual insurance coverage make up a small slice of UnitedHealth's overall business.
Overall, UnitedHealth's net income climbed to $1.61 billion in the first quarter, with adjusted earnings totaling $1.81 per share. That easily beat the per-share earnings of $1.72 that Wall Street had expected, according to Zacks Investment Research.
Revenue jumped nearly 25 percent to $44.53 billion.
The company said changes in an expected income tax rate and intangible amortization were behind its higher 2016 earnings forecast.
UnitedHealth Group is the first insurer to announce earnings every quarter. Many see it as a bellwether for the managed care sector.
Company shares climbed 2.24, or 1.8 percent, to $130 in premarket trading before Tuesday trading started on Wall Street.
That stock has climbed roughly 9 percent since the beginning of the year, while the Standard & Poor's 500 index has risen 2.5 percent.
UnitedHealth shares topped $131 late last month to set another all-time high price after raising that mark several times last year.