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Why You Should Hold Elevance Health (ELV) in Your Portfolio
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Elevance Health Inc. (ELV - Free Report) is well-poised to grow on the back of a strong inorganic growth profile and an increasing medical enrolment. ELV’s strategy to improve brand awareness through name change is expected to help expand its market.
ELV, with a market cap of $116.8 billion, is one of the largest publicly-traded managed care organizations in terms of membership. Elevance Health recently changed its name from Anthem, Inc. to reflect its expanding business. Management thinks that the rebranding step was essential for a bright future. It expects ELV to serve communities through a holistic approach following this fresh alteration.
Courtesy of solid prospects, this currently Zacks Rank #3 (Hold) stock is worth retaining in your portfolio at the moment.
Rising Estimates
The Zacks Consensus Estimate for Elevance Health’s 2022 earnings is pegged at $28.59 per share, indicating a 10.1% increase from the 2021 level. In the past 30 days, ELV has witnessed two upward estimate revisions against none in the opposite direction. ELV beat on earnings in each of the last four quarters, the average being 6%.
The consensus estimate for 2022 revenues stands at $153.4 billion, suggesting a 12% rise from the prior-year reported figure.
Key Drivers
Elevance Health expects total medical enrolment to grow 226,000-826,000 this year from the 2021 level. As of Mar 31, 2022, medical enrolment totaled 46.8 million members, 7.5% higher than the year-ago quarter’s level. Several contract wins and organic growth stories are expected to keep driving its membership, in turn boosting the top line.
Also, Elevance Health has a strong inorganic growth strategy in place, helping it expand the customer base. Some of ELV’s notable acquisitions include America's 1st Choice of South Carolina, CVS Health, Beacon Health, Integra Managed Care and others. The buyouts helped it increase Medicaid members, coverage, footprint in different markets and contract wins. Its prudent moves in growing its customer base will keep boosting its bottom line.
Increasing premium rates and higher memberships will continue improving ELV’s top line. In the first quarter of 2022, revenues of $37.9 billion increased 18% year over year on the back of solid contributions from its divisions. This growth is expected to continue, thanks to significant new contracts in its Wellpoint business.
ELV expects its rebranding move to optimize and streamline its brand portfolio. It will likely reduce complexities and simplify client experience. Also, Elevance Health continues witnessing a spike in the usage of its virtual care services, which is a vital driver. This will help ELV modernize the future of healthcare.
Elevance Health has been aggressively engaged in share buybacks for a while, utilizing its excess capital to boost shareholder value. During the first quarter, ELV bought back shares worth $545 million. As of Mar 31, 2022, it had $3.6 billion remaining under its share buyback authorization. In January 2022, ELV increased quarterly dividends 13%.
Risks
However, there are a few factors that might hinder the stock’s growth.
Declining free cash flows can be concerning. Elevance Health’s free cash flow after dividends declined 29.1% to $6.2 billion last year. Also, it has been enduring high expenses over the past few years, primarily caused by an increasing benefit expense and the cost of products sold. Nevertheless, we believe that a systematic and strategic plan of action augurs well for the long run.
The Zacks Consensus Estimate for Assertio’s second-quarter earnings indicates a 125% improvement from the year-ago quarter’s reported figure. ASRT’s earnings beat estimates twice in the last four quarters and missed the same on the other two occasions, the average surprise being 26.4%.
The Zacks Consensus Estimate for Acadia Healthcare’s 2022 bottom line indicates a 19.1% improvement from the 2021 level. ACHC has witnessed one upward estimate revision in the past 30 days against none in the opposite direction. ACHC’s earnings beat estimates twice in the last four quarters, met the same once and missed the mark on another occasion, the average surprise being 4.4%.
The Zacks Consensus Estimate for Altimmune’s 2022 bottom line indicates an 8.2% improvement from the 2021 level. ALT has witnessed four upward estimate revisions in the past 60 days against none in the opposite direction. ALT’s earnings beat estimates in three of the last four quarters and missed the mark on the remaining occasion.
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Why You Should Hold Elevance Health (ELV) in Your Portfolio
Elevance Health Inc. (ELV - Free Report) is well-poised to grow on the back of a strong inorganic growth profile and an increasing medical enrolment. ELV’s strategy to improve brand awareness through name change is expected to help expand its market.
ELV, with a market cap of $116.8 billion, is one of the largest publicly-traded managed care organizations in terms of membership. Elevance Health recently changed its name from Anthem, Inc. to reflect its expanding business. Management thinks that the rebranding step was essential for a bright future. It expects ELV to serve communities through a holistic approach following this fresh alteration.
Courtesy of solid prospects, this currently Zacks Rank #3 (Hold) stock is worth retaining in your portfolio at the moment.
Rising Estimates
The Zacks Consensus Estimate for Elevance Health’s 2022 earnings is pegged at $28.59 per share, indicating a 10.1% increase from the 2021 level. In the past 30 days, ELV has witnessed two upward estimate revisions against none in the opposite direction. ELV beat on earnings in each of the last four quarters, the average being 6%.
Elevance Health, Inc. Price and EPS Surprise
Elevance Health, Inc. price-eps-surprise | Elevance Health, Inc. Quote
The consensus estimate for 2022 revenues stands at $153.4 billion, suggesting a 12% rise from the prior-year reported figure.
Key Drivers
Elevance Health expects total medical enrolment to grow 226,000-826,000 this year from the 2021 level. As of Mar 31, 2022, medical enrolment totaled 46.8 million members, 7.5% higher than the year-ago quarter’s level. Several contract wins and organic growth stories are expected to keep driving its membership, in turn boosting the top line.
Also, Elevance Health has a strong inorganic growth strategy in place, helping it expand the customer base. Some of ELV’s notable acquisitions include America's 1st Choice of South Carolina, CVS Health, Beacon Health, Integra Managed Care and others. The buyouts helped it increase Medicaid members, coverage, footprint in different markets and contract wins. Its prudent moves in growing its customer base will keep boosting its bottom line.
Increasing premium rates and higher memberships will continue improving ELV’s top line. In the first quarter of 2022, revenues of $37.9 billion increased 18% year over year on the back of solid contributions from its divisions. This growth is expected to continue, thanks to significant new contracts in its Wellpoint business.
ELV expects its rebranding move to optimize and streamline its brand portfolio. It will likely reduce complexities and simplify client experience. Also, Elevance Health continues witnessing a spike in the usage of its virtual care services, which is a vital driver. This will help ELV modernize the future of healthcare.
Elevance Health has been aggressively engaged in share buybacks for a while, utilizing its excess capital to boost shareholder value. During the first quarter, ELV bought back shares worth $545 million. As of Mar 31, 2022, it had $3.6 billion remaining under its share buyback authorization. In January 2022, ELV increased quarterly dividends 13%.
Risks
However, there are a few factors that might hinder the stock’s growth.
Declining free cash flows can be concerning. Elevance Health’s free cash flow after dividends declined 29.1% to $6.2 billion last year. Also, it has been enduring high expenses over the past few years, primarily caused by an increasing benefit expense and the cost of products sold. Nevertheless, we believe that a systematic and strategic plan of action augurs well for the long run.
Key Picks
Some better-ranked stocks in the broader medical space are Assertio Holdings, Inc. (ASRT - Free Report) , Acadia Healthcare Company, Inc. (ACHC - Free Report) and Altimmune, Inc. (ALT - Free Report) . While Assertio sports a Zacks Rank #1 (Strong Buy), Acadia Healthcare and Altimmune carry a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Assertio’s second-quarter earnings indicates a 125% improvement from the year-ago quarter’s reported figure. ASRT’s earnings beat estimates twice in the last four quarters and missed the same on the other two occasions, the average surprise being 26.4%.
The Zacks Consensus Estimate for Acadia Healthcare’s 2022 bottom line indicates a 19.1% improvement from the 2021 level. ACHC has witnessed one upward estimate revision in the past 30 days against none in the opposite direction. ACHC’s earnings beat estimates twice in the last four quarters, met the same once and missed the mark on another occasion, the average surprise being 4.4%.
The Zacks Consensus Estimate for Altimmune’s 2022 bottom line indicates an 8.2% improvement from the 2021 level. ALT has witnessed four upward estimate revisions in the past 60 days against none in the opposite direction. ALT’s earnings beat estimates in three of the last four quarters and missed the mark on the remaining occasion.