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Why Is Elevance Health (ELV) Up 6.6% Since Last Earnings Report?
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It has been about a month since the last earnings report for Elevance Health (ELV - Free Report) . Shares have added about 6.6% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Elevance Health due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Elevance Health Q4 Earnings Beat on Premium Growth, Dividend Hiked
Elevance Health reported fourth-quarter 2023 adjusted earnings of $5.62 per share, which surpassed the Zacks Consensus Estimate by 1.3%. The bottom line climbed 15.2% year over year.
Operating revenues rose 7% year over year to almost $42.5 billion in the quarter under review. Also, the top line beat the consensus mark by 1.5%.
The strong quarterly results benefited on the back of improved premiums in the Commercial Health Benefits business and better performance in the Carelon Services business. However, the upside was partly offset by an elevated expense level.
2024 Outlook
Adjusted earnings are anticipated to be more than $37.10 per share, up from the 2023 reported figure of $33.14 per share. GAAP earnings are currently projected to be more than $34.29 per share. Operating margin for the Health Benefits segment is estimated to witness an increase of 25-50 basis points (bps) from the 2023 reported figure of 4.6%. Also, the operating margin for CarelonRx is expected to see 40-60 bps growth, while the same for Carelon Services is estimated to be flat to a decline of 30 bps.
Management expects operating revenues to witness flat to low-single-digit growth in 2024 from $170.2 billion in 2023. Premium revenues are estimated to remain in line with the 2023 level of $142.9 billion. Medical enrolment is forecasted to be within 45.8-46.6 million this year, down from 47 million in 2023.
Net investment income is anticipated to be $1.9 billion, marginally up from $1.8 billion in 2023. Interest expenses are forecasted to be $1.1 billion in 2024 while operating cash flow is likely to exceed the $8.1 billion level of 2023. Diluted shares are estimated to decline to 233-234 million from 237.4 million at 2023-end.
Q4 Operational Update
As of Dec 31, 2023, Elevance Health’s medical membership was around 47 million, which declined 1% year over year in the fourth quarter. The decrease can be attributed to the attrition in its Medicaid business and a fall in the Employer Group risk-based business, partially offset by increases in Affordable Care Act plans, BlueCard and Medicare Advantage. The reported figure fell short of the Zacks Consensus Estimate of 47.3 million.
Premiums of $35.1 billion advanced 4.4% year over year in the quarter under review and came higher than our estimate of $34 billion. Product revenues climbed 30.4% year over year to $5.4 billion, which beat our estimate of $5 billion. Net investment income of $529 million improved 41.8% year over year and outpaced our estimate by 9.2%. The total operating margin deteriorated 20 bps year over year at 3% in the fourth quarter.
Total expenses increased 7.1% year over year to $41.6 billion due to higher benefit expenses, cost of products sold and operating expenses. The reported figure came higher than our estimate of $39.9 billion. The operating expense ratio of 11.8% deteriorated 30 bps year over year and missed our estimate of 11.2%. The benefit expense ratio improved 50 bps year over year to 89.2%, which compared favorably with the consensus estimate of 89.6%.
Q4 Segmental Performance
Health Benefits
The segment reported operating revenues of $36.5 billion in the fourth quarter, which rose 4.3% year over year and surpassed our estimate of $36.2 billion on the back of higher premiums from the Commercial Health Benefits business. Operating gain declined 2.3% year over year to $767 million and lagged the consensus estimate of $1 billion due to the investments made for long-term growth. The operating margin deteriorated 10 bps year over year to 2.1% in the quarter under review.
Carelon
Operating revenues of the segment improved 14.1% year over year to $12.4 billion and came higher than the Zacks Consensus Estimate of $12.1 billion, thanks to the expansion of CarelonRx pharmacy product revenue, fueled by an increase in external pharmacy members served as well as the strategic buyout of BioPlus specialty pharmacy.
The unit’s operating gain increased 15.2% year over year to $592 million in the fourth quarter. Also, the metric beat the Zacks Consensus Estimate of $562.3 million, as well as our estimate of $555.7 million, thanks to the better performance in the Carelon Services businesses. The operating margin of 4.8% improved 10 bps year over year in the quarter under review.
Corporate & Other
Operating revenues of $181 million rose 212.1% year over year in the quarter under review. The unit incurred an operating loss of $75 million, wider than the prior-year quarter’s loss of $40 million.
Financial Details (as of Dec 31, 2023)
Elevance Health exited the fourth quarter with cash and cash equivalents of $6.5 billion, which fell from the 2022-end level of $7.4 billion. Total assets of $108.9 billion grew from the $102.8 billion figure at 2022 end.
Long-term debt, less current portion, was $23.2 billion, up from the $22.3 billion figure as of Dec 31, 2022. Short-term borrowings at the fourth-quarter end were at $225 million, while the current portion of the long-term debt amounted to $1.6 billion.
Total equity of $39.4 billion improved from the 2022-end level of $36.3 billion.
Elevance Health generated net cash flow from operations of $8.1 billion in 2023, which declined from the prior-year level of $8.4 billion.
Capital Deployment Update
Elevance Health bought back shares worth $929 million in the fourth quarter. It had a leftover capacity of around $4.2 billion under its share buyback authorization as of Dec 31, 2023.
Elevance Health paid out a quarterly dividend of $1.48 per share, adding up to a cash distribution worth $346 million in the quarter under review. It has increased the dividend by 10.1% to $1.63 per share.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
VGM Scores
At this time, Elevance Health has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Elevance Health has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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Why Is Elevance Health (ELV) Up 6.6% Since Last Earnings Report?
It has been about a month since the last earnings report for Elevance Health (ELV - Free Report) . Shares have added about 6.6% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Elevance Health due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Elevance Health Q4 Earnings Beat on Premium Growth, Dividend Hiked
Elevance Health reported fourth-quarter 2023 adjusted earnings of $5.62 per share, which surpassed the Zacks Consensus Estimate by 1.3%. The bottom line climbed 15.2% year over year.
Operating revenues rose 7% year over year to almost $42.5 billion in the quarter under review. Also, the top line beat the consensus mark by 1.5%.
The strong quarterly results benefited on the back of improved premiums in the Commercial Health Benefits business and better performance in the Carelon Services business. However, the upside was partly offset by an elevated expense level.
2024 Outlook
Adjusted earnings are anticipated to be more than $37.10 per share, up from the 2023 reported figure of $33.14 per share. GAAP earnings are currently projected to be more than $34.29 per share. Operating margin for the Health Benefits segment is estimated to witness an increase of 25-50 basis points (bps) from the 2023 reported figure of 4.6%. Also, the operating margin for CarelonRx is expected to see 40-60 bps growth, while the same for Carelon Services is estimated to be flat to a decline of 30 bps.
Management expects operating revenues to witness flat to low-single-digit growth in 2024 from $170.2 billion in 2023. Premium revenues are estimated to remain in line with the 2023 level of $142.9 billion. Medical enrolment is forecasted to be within 45.8-46.6 million this year, down from 47 million in 2023.
Net investment income is anticipated to be $1.9 billion, marginally up from $1.8 billion in 2023. Interest expenses are forecasted to be $1.1 billion in 2024 while operating cash flow is likely to exceed the $8.1 billion level of 2023. Diluted shares are estimated to decline to 233-234 million from 237.4 million at 2023-end.
Q4 Operational Update
As of Dec 31, 2023, Elevance Health’s medical membership was around 47 million, which declined 1% year over year in the fourth quarter. The decrease can be attributed to the attrition in its Medicaid business and a fall in the Employer Group risk-based business, partially offset by increases in Affordable Care Act plans, BlueCard and Medicare Advantage. The reported figure fell short of the Zacks Consensus Estimate of 47.3 million.
Premiums of $35.1 billion advanced 4.4% year over year in the quarter under review and came higher than our estimate of $34 billion. Product revenues climbed 30.4% year over year to $5.4 billion, which beat our estimate of $5 billion. Net investment income of $529 million improved 41.8% year over year and outpaced our estimate by 9.2%. The total operating margin deteriorated 20 bps year over year at 3% in the fourth quarter.
Total expenses increased 7.1% year over year to $41.6 billion due to higher benefit expenses, cost of products sold and operating expenses. The reported figure came higher than our estimate of $39.9 billion. The operating expense ratio of 11.8% deteriorated 30 bps year over year and missed our estimate of 11.2%. The benefit expense ratio improved 50 bps year over year to 89.2%, which compared favorably with the consensus estimate of 89.6%.
Q4 Segmental Performance
Health Benefits
The segment reported operating revenues of $36.5 billion in the fourth quarter, which rose 4.3% year over year and surpassed our estimate of $36.2 billion on the back of higher premiums from the Commercial Health Benefits business. Operating gain declined 2.3% year over year to $767 million and lagged the consensus estimate of $1 billion due to the investments made for long-term growth. The operating margin deteriorated 10 bps year over year to 2.1% in the quarter under review.
Carelon
Operating revenues of the segment improved 14.1% year over year to $12.4 billion and came higher than the Zacks Consensus Estimate of $12.1 billion, thanks to the expansion of CarelonRx pharmacy product revenue, fueled by an increase in external pharmacy members served as well as the strategic buyout of BioPlus specialty pharmacy.
The unit’s operating gain increased 15.2% year over year to $592 million in the fourth quarter. Also, the metric beat the Zacks Consensus Estimate of $562.3 million, as well as our estimate of $555.7 million, thanks to the better performance in the Carelon Services businesses. The operating margin of 4.8% improved 10 bps year over year in the quarter under review.
Corporate & Other
Operating revenues of $181 million rose 212.1% year over year in the quarter under review. The unit incurred an operating loss of $75 million, wider than the prior-year quarter’s loss of $40 million.
Financial Details (as of Dec 31, 2023)
Elevance Health exited the fourth quarter with cash and cash equivalents of $6.5 billion, which fell from the 2022-end level of $7.4 billion. Total assets of $108.9 billion grew from the $102.8 billion figure at 2022 end.
Long-term debt, less current portion, was $23.2 billion, up from the $22.3 billion figure as of Dec 31, 2022. Short-term borrowings at the fourth-quarter end were at $225 million, while the current portion of the long-term debt amounted to $1.6 billion.
Total equity of $39.4 billion improved from the 2022-end level of $36.3 billion.
Elevance Health generated net cash flow from operations of $8.1 billion in 2023, which declined from the prior-year level of $8.4 billion.
Capital Deployment Update
Elevance Health bought back shares worth $929 million in the fourth quarter. It had a leftover capacity of around $4.2 billion under its share buyback authorization as of Dec 31, 2023.
Elevance Health paid out a quarterly dividend of $1.48 per share, adding up to a cash distribution worth $346 million in the quarter under review. It has increased the dividend by 10.1% to $1.63 per share.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
VGM Scores
At this time, Elevance Health has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Elevance Health has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.