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Why Is Elevance Health (ELV) Up 7.3% 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 7.3% 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 drivers.
Elevance Health's Q2 Earnings Beat on Lower Benefit Expense
Elevance Health reported second-quarter 2024 adjusted earnings of $10.12 per share, which outpaced the Zacks Consensus Estimate by 1.3%. The bottom line improved 12% year over year.
Operating revenues of $43.2 billion dipped 0.4% year over year. However, the top line beat the consensus mark by 0.5%.
The quarterly results were driven by improved product revenues in the CarelonRx business and a significant rise in net investment income. However, the upside was partly offset by a decline in Medicaid and Medicare membership and reduced premium revenues, thus impacting overall margins.
Q2 Operational Update
Medical membership of Elevance Health was around 45.8 million as of Jun 30, 2024, which slipped 5% year over year. The decrease was due to attrition in its Medicaid business, partially offset by growth in commercial fee-based business. The reported figure missed the Zacks Consensus Estimate of 46.2 million and our estimate of 46.4 million.
Premiums decreased 3.2% year over year to $35.4 billion and came lower than the consensus mark of $35.8 billion and our estimate of $35.6 billion. Product revenues of $5.5 billion advanced 13.8% year over year, higher than the Zacks Consensus Estimate of $5.1 billion and our estimate of $5.2 billion. Net investment income climbed 22.1% year over year to $508 million, which surpassed the consensus mark of $474.6 million and our estimate of $451.4 million. Total operating margin improved 30 bps year over year to 6.4%.
Total expenses of $40.9 billion dipped 0.8% year over year but were higher than our estimate of $40.5 billion. The year-over-year decline was due to lower benefit expenses and the amortization of other intangible assets.
The operating expense ratio deteriorated 60 basis points (bps) year over year to 11.7%. The benefit expense ratio of 86.3% improved 10 bps year over year.
Segmental Results
Health Benefits
Operating revenues totaled $37.2 billion, which decreased 2.2% year over year and fell short of the Zacks Consensus Estimate of $37.3 billion and our estimate of $37.5 billion.
Operating gain remained almost flat year over year at $2.1 billion, lower than the consensus mark of $2.25 billion and our estimate of $2.23 billion. The operating margin of 5.8% improved 20 bps year over year.
Carelon
The segment’s operating revenues amounted to $13.3 billion, which rose 10% year over year. The uptick was due to the introduction and expansion of risk-based medical benefit and behavioral health management services within Carelon Services, increased CarelonRx product revenues stemming from external members served and the Paragon Healthcare buyout in the first quarter. The reported figure outpaced the Zacks Consensus Estimate of $12.8 billion and our estimate of $12.9 billion.
The unit’s operating gain of $705 million advanced 8% year over year, lower than the consensus mark of $720.3 million but surpassing our estimate of $697.2 million. The metric gained from the enhanced performance in risk-based arrangements within Carelon Services. The operating margin deteriorated 10 bps year over year to 5.3%.
Corporate & Other
Operating revenues improved 8.9% year over year to $122 million in the second quarter. The unit incurred an operating loss of $85 million, narrower than the prior-year quarter’s loss of $163 million.
Financial Details (as of Jun 30, 2024)
Elevance Health exited the second quarter with cash and cash equivalents of $6.5 billion, which dipped 0.4% from the 2023-end level. Total assets of $113 billion increased 3.7% from the figure at 2023 end.
Long-term debt, less the current portion, amounted to $24.6 billion, up 5.7% from the figure as of Dec 31, 2023. Short-term borrowings at the second-quarter end were $225 million while the current portion of the long-term debt amounted to $2.9 billion.
Total equity of $42.3 billion rose 7.3% from the 2023-end level.
Elevance Health generated net cash flow from operations of $2.4 billion in the first half of 2024 against $8.4 billion of net cash from operations during the prior-year comparable period.
Capital Deployment Update
Elevance Health bought back shares worth $462 million in the second quarter. It had a leftover capacity of around $3.2 billion under its share buyback authorization as of Jun 30, 2024.
Elevance Health paid out a quarterly dividend of $1.63 per share, adding up to a cash distribution worth $378 million.
2024 Outlook
Earnings View Reiterated
Adjusted earnings continue to be estimated at a minimum of $37.20 per share, which indicates an improvement of 12% from the 2023 figure. GAAP earnings continue to be projected to be a minimum of $34.05 per share.
Prior Projections
Earlier, management estimated operating revenues to show flat to low single-digit growth in 2024. Premium revenues were projected to remain almost flat from the 2023 level. Medical enrollment was forecasted to be between 45.8 and 46.6 million.
Net investment income was expected to be $1.9 billion, while interest expenses were estimated to be $1.1 billion.
Operating cash flow was estimated to surpass the $8.1 billion level recorded in 2023.
It was also anticipated that the operating margin for the Health Benefits segment will increase 25-50 bps from the 2023 figure. Additionally, the operating margin for CarelonRx was expected to grow 40-60 bps while the same for Carelon Services was projected to remain flat or decline up to 30 bps on a year-over-year basis.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
VGM Scores
Currently, Elevance Health has a poor Growth Score of F, a grade with the same score on the momentum front. 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 D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Elevance Health has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Why Is Elevance Health (ELV) Up 7.3% 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 7.3% 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 drivers.
Elevance Health's Q2 Earnings Beat on Lower Benefit Expense
Elevance Health reported second-quarter 2024 adjusted earnings of $10.12 per share, which outpaced the Zacks Consensus Estimate by 1.3%. The bottom line improved 12% year over year.
Operating revenues of $43.2 billion dipped 0.4% year over year. However, the top line beat the consensus mark by 0.5%.
The quarterly results were driven by improved product revenues in the CarelonRx business and a significant rise in net investment income. However, the upside was partly offset by a decline in Medicaid and Medicare membership and reduced premium revenues, thus impacting overall margins.
Q2 Operational Update
Medical membership of Elevance Health was around 45.8 million as of Jun 30, 2024, which slipped 5% year over year. The decrease was due to attrition in its Medicaid business, partially offset by growth in commercial fee-based business. The reported figure missed the Zacks Consensus Estimate of 46.2 million and our estimate of 46.4 million.
Premiums decreased 3.2% year over year to $35.4 billion and came lower than the consensus mark of $35.8 billion and our estimate of $35.6 billion. Product revenues of $5.5 billion advanced 13.8% year over year, higher than the Zacks Consensus Estimate of $5.1 billion and our estimate of $5.2 billion. Net investment income climbed 22.1% year over year to $508 million, which surpassed the consensus mark of $474.6 million and our estimate of $451.4 million. Total operating margin improved 30 bps year over year to 6.4%.
Total expenses of $40.9 billion dipped 0.8% year over year but were higher than our estimate of $40.5 billion. The year-over-year decline was due to lower benefit expenses and the amortization of other intangible assets.
The operating expense ratio deteriorated 60 basis points (bps) year over year to 11.7%. The benefit expense ratio of 86.3% improved 10 bps year over year.
Segmental Results
Health Benefits
Operating revenues totaled $37.2 billion, which decreased 2.2% year over year and fell short of the Zacks Consensus Estimate of $37.3 billion and our estimate of $37.5 billion.
Operating gain remained almost flat year over year at $2.1 billion, lower than the consensus mark of $2.25 billion and our estimate of $2.23 billion. The operating margin of 5.8% improved 20 bps year over year.
Carelon
The segment’s operating revenues amounted to $13.3 billion, which rose 10% year over year. The uptick was due to the introduction and expansion of risk-based medical benefit and behavioral health management services within Carelon Services, increased CarelonRx product revenues stemming from external members served and the Paragon Healthcare buyout in the first quarter. The reported figure outpaced the Zacks Consensus Estimate of $12.8 billion and our estimate of $12.9 billion.
The unit’s operating gain of $705 million advanced 8% year over year, lower than the consensus mark of $720.3 million but surpassing our estimate of $697.2 million. The metric gained from the enhanced performance in risk-based arrangements within Carelon Services. The operating margin deteriorated 10 bps year over year to 5.3%.
Corporate & Other
Operating revenues improved 8.9% year over year to $122 million in the second quarter. The unit incurred an operating loss of $85 million, narrower than the prior-year quarter’s loss of $163 million.
Financial Details (as of Jun 30, 2024)
Elevance Health exited the second quarter with cash and cash equivalents of $6.5 billion, which dipped 0.4% from the 2023-end level. Total assets of $113 billion increased 3.7% from the figure at 2023 end.
Long-term debt, less the current portion, amounted to $24.6 billion, up 5.7% from the figure as of Dec 31, 2023. Short-term borrowings at the second-quarter end were $225 million while the current portion of the long-term debt amounted to $2.9 billion.
Total equity of $42.3 billion rose 7.3% from the 2023-end level.
Elevance Health generated net cash flow from operations of $2.4 billion in the first half of 2024 against $8.4 billion of net cash from operations during the prior-year comparable period.
Capital Deployment Update
Elevance Health bought back shares worth $462 million in the second quarter. It had a leftover capacity of around $3.2 billion under its share buyback authorization as of Jun 30, 2024.
Elevance Health paid out a quarterly dividend of $1.63 per share, adding up to a cash distribution worth $378 million.
2024 Outlook
Earnings View Reiterated
Adjusted earnings continue to be estimated at a minimum of $37.20 per share, which indicates an improvement of 12% from the 2023 figure. GAAP earnings continue to be projected to be a minimum of $34.05 per share.
Prior Projections
Earlier, management estimated operating revenues to show flat to low single-digit growth in 2024. Premium revenues were projected to remain almost flat from the 2023 level. Medical enrollment was forecasted to be between 45.8 and 46.6 million.
Net investment income was expected to be $1.9 billion, while interest expenses were estimated to be $1.1 billion.
Operating cash flow was estimated to surpass the $8.1 billion level recorded in 2023.
It was also anticipated that the operating margin for the Health Benefits segment will increase 25-50 bps from the 2023 figure. Additionally, the operating margin for CarelonRx was expected to grow 40-60 bps while the same for Carelon Services was projected to remain flat or decline up to 30 bps on a year-over-year basis.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
VGM Scores
Currently, Elevance Health has a poor Growth Score of F, a grade with the same score on the momentum front. 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 D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Elevance Health has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.