UnitedHealth Group (Minnetonka, MN) released a lot of data during its 2010 investor conference yesterday, but the most interesting is the company’s projection that earnings per share will grow 13% to 16% annually over the next five years — despite a projected decline of 8% in 2011. In other words, earnings would have to rise 20%+ annually between 2012 and 2015 for United to hit the mid-range of its projection. [See correction below]. From 2005 through 2010, United is tracking at about 11% average annual EPS growth. And that’s before healthcare reform, minimum medical cost ratio requirements and Medicare reimbursement cuts. Scott Fidel of Deutsche Bank is projecting EPS growth for United of about 8% to 12% annually beyond 2011. You make the call.
Correction/Clarification (Dec. 1, 2010, 2:09 EST): I just heard back from UnitedHealth’s investor relations department, which clarified that the 13% to 16% annual EPS growth projection over five years uses 2011 as a base year. United expects to get there with a 6% to 9% annual increase in revenues, 20 to 40 basis points of annual improvement in administrative cost ratio, and a 5% addition to EPS from capital deployment. The projection is still higher than what analysts like Fidel expect, but there’s no need for United to boost EPS by 20% annually from 2012 to 2015 to hit the average (given the 2011 decline) as I had incorrectly suggested above.
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