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Elevance Health Stock Has More to Offer: Should You Hold on Tight?
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Elevance Health, Inc. (ELV - Free Report) is well-poised to grow on the back of Carelon’s business strength and commercial member growth. The company keeps expanding its operating margins for both Health Benefits and Carelon units, which positions it for improving profits.
Elevance Health — with a market cap of $129.1 billion — is a major health benefits company. Courtesy of solid prospects, this presently Zacks Rank #3 (Hold) stock is worth retaining at the moment.
Let’s delve deeper.
ELV YTD Price Performance
Shares of Elevance Health have jumped 19.2% in the year-to-date period, outperforming the industry and the S&P 500 Index’s 7.9% and 18.4% growth, respectively. Currently priced at $562.29, the stock is just below its 52-week high of $567.26. This proximity underscores investor confidence and market optimism about this health insurance company’s prospects. It has the ingredients for further price appreciation.
Image Source: Zacks Investment Research
Key Points to Note for ELV
In the commercial category, an increase in individual as well as employer group fee-based memberships will continue supporting its medical membership numbers amid Medicaid attrition related headwinds. Moreover, dental and vision memberships are on the rise.
The company continues to scale its Carelon business with prudent acquisitions. Its Kroger’s Specialty Pharmacy acquisition will enhance the Carelon Rx sub-segment’s access to limited distribution drugs and expand its existing infusion and pharmacy businesses. ELV's ROIC of 11.2% surpasses the industry average of 8.2%, indicating strong capital efficiency.
Premium rate increases and product expansions will continue to support ELV’s growth trajectory. Optimization of commercial risk-based business will continue to enhance its Health Benefits profits. Our model estimate predicts its operating margin to reach 5% this year, up from last year’s 4.6%. We also expect its total Carelon operating margin to be 8.6% in 2024, up from 7.8% a year ago. These margin expansions are reflected in the company's earnings estimates.
Despite the growth in stock price, ELV is trading at a discount compared to the industry average. The company's forward 12-month price-to-earnings (P/E) ratio stands at 13.98X, below the industry average of 15.95X, indicating undervaluation. The company has a Value Score of A. Hence, this is an attractive option to retain in an investment portfolio.
ELV Earnings Estimates
The Zacks Consensus Estimate for ELV’s 2024 earnings is pegged at $37.25 per share, indicating a 12.4% improvement from the year-ago figure. The estimate remained stable over the past week. The consensus mark for 2025 earnings suggests further 11.8% year-over-year growth. Elevance Health beat on earnings in all the last four quarters, with an average surprise of 2.5%. This is depicted in the figure below.
The consensus mark for 2024 and 2025 revenues signals 1.4% and 6.7% year-over-year growth, respectively.
Key Concerns for ELV
There are a few factors that investors should keep an eye on.
ELV’s rising benefit expense ratio indicates a lower portion of premiums will remain in hand after paying claims. We expect the benefit expense ratio to grow by 30 basis points in 2024, with more significant impacts expected in the year's second half.
Also, the company’s operating cash flow is declining. It expects the metric to be slightly north of $7 billion for 2024, down from more than $8 billion in 2023 and $8.4 billion in 2022. Nevertheless, we believe that a systematic and strategic plan of action will drive ELV’s growth in the long term.
Better-Ranked Players
Investors can look at some better-ranked stocks in the broader Medical space, like Universal Health Services, Inc. (UHS - Free Report) , Tenet Healthcare Corporation (THC - Free Report) and Quest Diagnostics Incorporated (DGX - Free Report) . While Universal Health and Tenet Healthcare currently sport a Zacks Rank #1 (Strong Buy) each, Quest Diagnostics carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Universal Health Services’ 2024 bottom line suggests 50.8% year-over-year growth. UHS witnessed two upward estimate revisions over the past month against no movement in the opposite direction. It beat earnings estimates in each of the last four quarters, with the average surprise being 14.6%.
The Zacks Consensus Estimate for Tenet Healthcare’s 2024 bottom line is pegged at $10.70 per share, which indicates 53.3% growth from a year ago. During the past month, THC witnessed two upward estimate revisions against none in the opposite direction. It beat earnings estimates in each of the last four quarters, with the average surprise being 58.5%.
The Zacks Consensus Estimate for Quest Diagnostics’ 2024 full-year earnings implies a 2.1% increase from the year-ago reported figure. DGX beat earnings estimates in each of the last four quarters, with an average surprise of 3.3%. The consensus mark for its current-year revenues is pegged at $9.6 billion, which indicates a 3.3% year-over-year increase.
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Elevance Health Stock Has More to Offer: Should You Hold on Tight?
Elevance Health, Inc. (ELV - Free Report) is well-poised to grow on the back of Carelon’s business strength and commercial member growth. The company keeps expanding its operating margins for both Health Benefits and Carelon units, which positions it for improving profits.
Elevance Health — with a market cap of $129.1 billion — is a major health benefits company. Courtesy of solid prospects, this presently Zacks Rank #3 (Hold) stock is worth retaining at the moment.
Let’s delve deeper.
ELV YTD Price Performance
Shares of Elevance Health have jumped 19.2% in the year-to-date period, outperforming the industry and the S&P 500 Index’s 7.9% and 18.4% growth, respectively. Currently priced at $562.29, the stock is just below its 52-week high of $567.26. This proximity underscores investor confidence and market optimism about this health insurance company’s prospects. It has the ingredients for further price appreciation.
Image Source: Zacks Investment Research
Key Points to Note for ELV
In the commercial category, an increase in individual as well as employer group fee-based memberships will continue supporting its medical membership numbers amid Medicaid attrition related headwinds. Moreover, dental and vision memberships are on the rise.
The company continues to scale its Carelon business with prudent acquisitions. Its Kroger’s Specialty Pharmacy acquisition will enhance the Carelon Rx sub-segment’s access to limited distribution drugs and expand its existing infusion and pharmacy businesses. ELV's ROIC of 11.2% surpasses the industry average of 8.2%, indicating strong capital efficiency.
Premium rate increases and product expansions will continue to support ELV’s growth trajectory. Optimization of commercial risk-based business will continue to enhance its Health Benefits profits. Our model estimate predicts its operating margin to reach 5% this year, up from last year’s 4.6%. We also expect its total Carelon operating margin to be 8.6% in 2024, up from 7.8% a year ago. These margin expansions are reflected in the company's earnings estimates.
Despite the growth in stock price, ELV is trading at a discount compared to the industry average. The company's forward 12-month price-to-earnings (P/E) ratio stands at 13.98X, below the industry average of 15.95X, indicating undervaluation. The company has a Value Score of A. Hence, this is an attractive option to retain in an investment portfolio.
ELV Earnings Estimates
The Zacks Consensus Estimate for ELV’s 2024 earnings is pegged at $37.25 per share, indicating a 12.4% improvement from the year-ago figure. The estimate remained stable over the past week. The consensus mark for 2025 earnings suggests further 11.8% year-over-year growth. Elevance Health beat on earnings in all the last four quarters, with an average surprise of 2.5%. This is depicted in the figure below.
Elevance Health, Inc. Price and EPS Surprise
Elevance Health, Inc. price-eps-surprise | Elevance Health, Inc. Quote
The consensus mark for 2024 and 2025 revenues signals 1.4% and 6.7% year-over-year growth, respectively.
Key Concerns for ELV
There are a few factors that investors should keep an eye on.
ELV’s rising benefit expense ratio indicates a lower portion of premiums will remain in hand after paying claims. We expect the benefit expense ratio to grow by 30 basis points in 2024, with more significant impacts expected in the year's second half.
Also, the company’s operating cash flow is declining. It expects the metric to be slightly north of $7 billion for 2024, down from more than $8 billion in 2023 and $8.4 billion in 2022. Nevertheless, we believe that a systematic and strategic plan of action will drive ELV’s growth in the long term.
Better-Ranked Players
Investors can look at some better-ranked stocks in the broader Medical space, like Universal Health Services, Inc. (UHS - Free Report) , Tenet Healthcare Corporation (THC - Free Report) and Quest Diagnostics Incorporated (DGX - Free Report) . While Universal Health and Tenet Healthcare currently sport a Zacks Rank #1 (Strong Buy) each, Quest Diagnostics carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Universal Health Services’ 2024 bottom line suggests 50.8% year-over-year growth. UHS witnessed two upward estimate revisions over the past month against no movement in the opposite direction. It beat earnings estimates in each of the last four quarters, with the average surprise being 14.6%.
The Zacks Consensus Estimate for Tenet Healthcare’s 2024 bottom line is pegged at $10.70 per share, which indicates 53.3% growth from a year ago. During the past month, THC witnessed two upward estimate revisions against none in the opposite direction. It beat earnings estimates in each of the last four quarters, with the average surprise being 58.5%.
The Zacks Consensus Estimate for Quest Diagnostics’ 2024 full-year earnings implies a 2.1% increase from the year-ago reported figure. DGX beat earnings estimates in each of the last four quarters, with an average surprise of 3.3%. The consensus mark for its current-year revenues is pegged at $9.6 billion, which indicates a 3.3% year-over-year increase.