Elevance Health (ELV) to Post Q3 Earnings: A Beat in the Cards?

Elevance Health Inc. ELV is set to continue its earnings beat streak in third-quarter 2022, results of which are expected to be released on Oct 19, before the opening bell.

In the last reported quarter, the health benefits company’s adjusted earnings per share of $8.04 beat the Zacks Consensus Estimate of $7.72 by 4.2%, primarily due to membership growth across the Commercial & Specialty Business as well as the Government Business, increased premiums and adjusted premium rates in Medicare. The company has bumped up its premium rates to cover the rising cost trends.

Let’s see how things have shaped up prior to the third-quarter earnings announcement.

The Trend in Estimate Revision

The Zacks Consensus Estimate for the third-quarter earnings per share of $7.10 is indicative of a 4.6% increase from the year-ago reported figure. We expect the bottom line to be $7.12 per share. The Zacks Consensus Estimate for third-quarter revenues is pegged at $39.1 billion, suggesting a jump of 10% from the year-ago reported figure. Our estimate suggests total revenues to come at $39.5 billion in the third quarter.

Elevance Health beat earnings estimates in each of the trailing four quarters, delivering an average of 4.3%. This is depicted in the graph below.

Elevance Health, Inc. Price and EPS Surprise

Elevance Health, Inc. Price and EPS Surprise

Elevance Health, Inc. price-eps-surprise | Elevance Health, Inc. Quote

What the Quantitative Model Suggests

Our proven model predicts an earnings beat for Elevance Health this time around as well. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat.

Earnings ESP: The company currently has an Earnings ESP of +1.27%. The Most Accurate Estimate is pegged at $7.19 per share, higher than the Zacks Consensus Estimate of $7.10. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Elevance Health currently carries a Zacks Rank #3.

Factors Driving Better-Than-Expected Earnings

Elevance Health’s third-quarter revenues are likely to have benefited from higher premiums and solid contributions by its Commercial & Specialty Business and Government Business units. The rising memberships attributable to ELV’s Medicare and Medicaid businesses are expected to have provided an impetus to the to-be-reported quarter’s performance.

The increased memberships, when combined with ELV’s buyout of Integra Managed Care, are expected to have benefited the health insurer’s Government Business. Our estimate suggests that the segment revenues will see a 7.2% year-over-year increase.

Meanwhile, its Commercial Business is likely to have been driven by robust growth in risk-based areas. We expected the segment’s operating income to have witnessed 19.4% year-over-year growth in the third quarter. This is likely to have positioned the company’s bottom line for a year-over-year increase and a beat in the to-be-reported quarter.

Our estimates suggest total premiums to have witnessed 9.3% growth in the third quarter. Further, we expect net investment income to have witnessed a 15.4% year-over-year rise in the quarter under review. As such, gross profits might have increased 9% in the September quarter.

However, its expenses are likely to have remained elevated in the quarter due to substantial investments in innovation and digital advancements. We expect total expenses to have jumped 9.4% in the third quarter, slightly reducing profit margins.

Other Stocks That Warrant a Look

Here are some other companies from the broader medical space that you may also want to consider, as our model shows that these too have the right combination of elements to post an earnings beat this time around:

Pediatrix Medical Group, Inc. MD has an Earnings ESP of +2.59% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Pediatrix Medical’s bottom line for the to-be-reported quarter indicates a 15.2% improvement from the year-ago period. MD beat earnings estimates in three of the past four quarters and met once, with an earnings surprise of 12.5%.

Syros Pharmaceuticals, Inc. SYRS has an Earnings ESP of +20.84% and is a Zacks #2 Ranked player.

The Zacks Consensus Estimate for Syros Pharmaceuticals’ earnings per share for the to-be-reported quarter implies a 1% improvement from the year-ago figure. SYRS witnessed two upward estimate revisions in the past 30 days compared with none in the opposite direction.

TeladocHealth, Inc. TDOC has an Earnings ESP of +16.24% and is a Zacks #3 Ranked player.

The Zacks Consensus Estimate for Teladoc’s bottom line for the to-be-reported quarter has improved 3.3% in the past 60 days. TDOC beat earnings estimates in each of the past four quarters, with an earnings surprise of 41.3%.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

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Pediatrix Medical Group, Inc. (MD) : Free Stock Analysis Report
 
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