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Here's Why You Should Add Elevance Health Stock to Your Portfolio
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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 $114.2 billion — is a major health benefits company. Courtesy of solid prospects, this Zacks Rank #2 (Buy) stock is worth adding to your portfolio at the moment.
Let’s delve deeper.
ELV's One-Year Price Performance
Shares of Elevance Health have gained 7.5% in the past year, outperforming the industry’s 6.4% growth.
Image Source: Zacks Investment Research
Key Drivers
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 8.4%, indicating strong capital efficiency.
Elevance Health is set to acquire Indiana University Health's insurance business, which includes Medicare Advantage and commercial plans, expanding its Anthem Blue Cross and Blue Shield subsidiary. These acquisitions help Elevance Health expand its market presence, diversify revenue streams, and strengthen its offerings in Medicare Advantage and Medicaid services.
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 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 12.04X, below the industry average of 14.78X, indicating undervaluation. The company has a Value Score of A. Hence, this is an attractive option to retain in an investment portfolio.
However, 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 30 basis points in 2024, with more significant impacts expected in the year's second half.
ELV Earnings Estimates
The Zacks Consensus Estimate for ELV’s 2024 earnings is pegged at $37.26 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 a 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 indicates 1.4% and 6.8% year-over-year growth, respectively.
DaVita’s earnings surpassed estimates in each of the last four quarters, the average surprise being 24.24%. The Zacks Consensus Estimate for DVA’s 2024 earnings indicates a rise of 18% while the estimate for revenues implies an improvement of 5.4% from the respective year-ago actuals. The consensus mark for DVA’s earnings has moved 0.9% north in the past 60 days.
The bottom line of HCA Healthcare beat estimates in three of the trailing four quarters and missed the mark once, the average surprise being 8.24%. The Zacks Consensus Estimate for HCA’s 2024 earnings indicates a rise of 18.4% while the estimate for revenues implies an improvement of 8.9% from the respective prior-year tallies. The consensus mark for HCA’s earnings has moved 0.2% north in the past 30 days.
Pennant’s earnings outpaced estimates in three of the trailing four quarters and matched the mark once, the average surprise being 7.67%. The Zacks Consensus Estimate for PNTG’s 2024 earnings indicates a rise of 26% while the estimate for revenues implies an improvement of 24.4% from the respective prior-year tallies. The consensus mark for PNTG’s earnings has moved 3.4% north in the past 60 days.
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Here's Why You Should Add Elevance Health Stock to Your Portfolio
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 $114.2 billion — is a major health benefits company. Courtesy of solid prospects, this Zacks Rank #2 (Buy) stock is worth adding to your portfolio at the moment.
Let’s delve deeper.
ELV's One-Year Price Performance
Shares of Elevance Health have gained 7.5% in the past year, outperforming the industry’s 6.4% growth.
Image Source: Zacks Investment Research
Key Drivers
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 8.4%, indicating strong capital efficiency.
Elevance Health is set to acquire Indiana University Health's insurance business, which includes Medicare Advantage and commercial plans, expanding its Anthem Blue Cross and Blue Shield subsidiary. These acquisitions help Elevance Health expand its market presence, diversify revenue streams, and strengthen its offerings in Medicare Advantage and Medicaid services.
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 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 12.04X, below the industry average of 14.78X, indicating undervaluation. The company has a Value Score of A. Hence, this is an attractive option to retain in an investment portfolio.
However, 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 30 basis points in 2024, with more significant impacts expected in the year's second half.
ELV Earnings Estimates
The Zacks Consensus Estimate for ELV’s 2024 earnings is pegged at $37.26 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 a 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 indicates 1.4% and 6.8% year-over-year growth, respectively.
Other Key Picks
Some other top-ranked stocks in the Medical space are DaVita Inc. (DVA - Free Report) , HCA Healthcare, Inc. (HCA - Free Report) and The Pennant Group, Inc. (PNTG - Free Report) . While DaVita currently sports a Zacks Rank #1 (Strong Buy), HCA Healthcare and Pennant carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
DaVita’s earnings surpassed estimates in each of the last four quarters, the average surprise being 24.24%. The Zacks Consensus Estimate for DVA’s 2024 earnings indicates a rise of 18% while the estimate for revenues implies an improvement of 5.4% from the respective year-ago actuals. The consensus mark for DVA’s earnings has moved 0.9% north in the past 60 days.
The bottom line of HCA Healthcare beat estimates in three of the trailing four quarters and missed the mark once, the average surprise being 8.24%. The Zacks Consensus Estimate for HCA’s 2024 earnings indicates a rise of 18.4% while the estimate for revenues implies an improvement of 8.9% from the respective prior-year tallies. The consensus mark for HCA’s earnings has moved 0.2% north in the past 30 days.
Pennant’s earnings outpaced estimates in three of the trailing four quarters and matched the mark once, the average surprise being 7.67%. The Zacks Consensus Estimate for PNTG’s 2024 earnings indicates a rise of 26% while the estimate for revenues implies an improvement of 24.4% from the respective prior-year tallies. The consensus mark for PNTG’s earnings has moved 3.4% north in the past 60 days.