Yahoo Finance Why Is Elevance Health (ELV) Up 0.1% Since Last Earnings Report?
It has been about a month since the last earnings report for Elevance Health (ELV). Shares have added about 0.1% in that time frame, underperforming 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 the most recent earnings report in order to get a better handle on the important catalysts.
Elevance Health Beats Q3 Earnings, Hikes '23 Profit View
Elevance Health reported third-quarter 2023 adjusted net income of $8.99 per share, which surpassed the Zacks Consensus Estimate by 6.4%. The bottom line climbed 20.5% year over year. Its shares gained 3.9% in the pre-market trading session, reflecting the outperformance.
Operating revenues rose 7.2% year over year to $42.5 billion in the quarter under review. Yet, the top line missed the consensus mark by a whisker.
The quarterly results benefited on the back of improved premium revenues in the Health Benefits business, higher growth in external pharmacy members served and the buyout of BioPlus. However, the upside was partly offset by an elevated expense level.
Quarterly Operational Update
As of Sep 30, 2023, Elevance Health’s medical membership was around 47.3 million, which inched up 0.1% year over year in the third quarter. The improvement can be attributed to a growing customer base across BlueCard, Affordable Care Act health plan and Medicare Advantage businesses. Yet, the reported figure fell short of the Zacks Consensus Estimate of 47.8 million and our estimate of 47.4 million.
The benefit expense ratio improved 40 basis points (bps) year over year to 86.8%, which compared favorably with our estimate of 87%.
Premiums of $35.3 billion advanced 4.6% year over year in the quarter under review, higher than our estimate of $34.3 billion. Product revenues climbed 30.3% year over year to $5.2 billion, which beat the consensus mark of $4.8 billion.
Net investment income of $493 million improved 32.9% year over year and outpaced our estimate of $402 million. The total operating margin deteriorated 160 bps year over year at 4.1% in the third quarter.
Total expenses increased 8.9% year over year to $41.2 billion due to higher benefit expenses, cost of products sold and operating costs. The reported figure came higher than our estimate of $38.1 billion. The operating expense ratio of 12.9% deteriorated 150 bps year over year.
Segmental Performance
Health Benefits
The segment reported operating revenues of $36.7 billion in the third quarter, which rose 4.8% year over year and surpassed our estimate of $35.6 billion. Operating gain advanced 13% year over year to $1.8 billion but lagged our estimate of $1.9 billion. Premium rate adjustments contributed to the unit’s performance. The operating margin improved 30 bps year over year to 5% in the quarter under review.
Carelon
Operating revenues of the segment improved 14.3% year over year to $11.9 billion, higher than our estimate of $10.8 billion. The unit’s operating gain inched up 1.4% year over year to $650 million in the third quarter on the back of consistent growth in its post-acute care services business, the BioPlus acquisition and the solid performance of its Behavioral Health business. However, the metric missed the Zacks Consensus Estimate of $683 million as well as our estimate of $698.3 million. The operating margin of 5.5% deteriorated 70 bps year over year in the quarter under review.
Corporate & Other
Operating revenues of $242 million rose 14.7% year over year in the quarter under review. The unit incurred an operating loss of $741 million, wider than the prior-year quarter’s loss of $24 million due to business optimization charges.
Financial Details (as of Sep 30, 2023)
Elevance Health exited the third quarter with cash and cash equivalents of $10.9 billion, which soared 47.8% from the 2022-end level.
Total assets of $110.5 billion grew 7.5% from the figure at 2022 end.
Long-term debt, less of the current portion, was $24 billion, up 7.6% from the figure as of Dec 31, 2022. There were no short-term borrowings at the third-quarter end, while the current portion of the long-term debt amounted to $799 million.
Total equity of $38.5 billion improved 6.1% from the 2022-end level.
ELV generated cash flows from operations of $11 billion in the first nine months of 2023, which advanced 11.2% from the prior-year comparable period.
Capital Deployment Update
Elevance Health bought back shares worth $480 million in the third quarter. It had a leftover capacity of around $5.1 billion under its share buyback authorization as of Sep 30, 2023.
ELV paid out a quarterly dividend of $1.48 per share, adding up to a cash distribution worth $348 million in the quarter under review.
2023 Outlook
The strong performance witnessed in the first nine months of 2023 made management optimistic to hike its adjusted earnings guidance for this year.
Adjusted net income is anticipated to be more than $33.00 per share, up from the previous guidance of more than $32.85 per share and the 2022 reported figure of $29.07 per share. GAAP net income is currently projected to be more than $26.40 per share.
Management earlier expected operating revenues to be $164 billion for 2023. Premium revenues were estimated to be $140 billion. Medical enrollment was forecasted to be 47.4-48.5 million this year. Net investment income was anticipated to be $1.6 billion. Interest expenses was forecasted to be $1 billion in 2023 while operating cash flows were likely to exceed $7.6 billion. Operating margin for the Health Benefits segment was estimated to witness an increase of 25-50 bps from the 2022 reported figure.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
VGM Scores
At this time, Elevance Health has a great Growth Score of A, though it is lagging a lot on the Momentum Score front 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 A. 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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Elevance Health, Inc. (ELV) : Free Stock Analysis Report
