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Why Is Elevance Health (ELV) Down 5% Since Last Earnings Report?
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A month has gone by since the last earnings report for Elevance Health (ELV - Free Report) . Shares have lost about 5% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Elevance Health due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Elevance Health Beats on Q3 Earnings, Ups '22 EPS View
Elevance Health Inc. (ELV Quick QuoteELV - Research Report) reported its third-quarter 2022 earnings of $7.53 per share, which outpaced the Zacks Consensus Estimate of $7.10 and our estimate of $7.12. The bottom line also improved 10.9% year over year.
Operating revenues of Elevance Health in the third quarter totaled $39,625 million, which rose 11.5% year over year. The top line also beat the consensus mark of $39,106 million and our estimate of $38,683 million.
The strong third-quarter results can be attributed to membership growth, increased premiums, and Medicaid business performance. Excellent performance in Commercial & Specialty Business and IngenioRx supported its results. The positives were partially offset by higher expenses.
Quarterly Operational Update
As of Sep 30, 2022, medical enrollment of Elevance Health amounted to roughly 47.3 million, which grew 4.9% year over year, driven by higher enrollment across Commercial & Specialty Businesses as well as Government Businesses. ELV's benefit expense ratio of 87.2% decreased 50 basis points (bps) year over year due to the realignment of some quality improvement expenses.
Premiums jumped 10.9% year over year to $33,722 million in the third quarter, beating our estimate of $33,235.3 million. Its product revenues rose 18.5% year over year to $3,972 million and beat our estimate of $3,464.3 million.
Net investment income increased 10.7% year over year to $371 million but missed our estimate of $386.7 million. Total operating margin declined 10 bps year over year to 5.7%.
The SG&A expense ratio increased 30 bps year over year to 11.4% in the quarter under review, attributable to higher spending to boost operations, partially offset by operating expense leverage linked with growing operating revenues. Total expenses of $37,793 million escalated 11.7% year over year due to increased benefit expenses, cost of products sold, and selling, general and administrative expenses. It was higher than our estimate of $37,006.8 million for the third quarter.
Segmental Results
Commercial & Specialty Business
Operating revenues improved 6.4% year over year to $10,494 million in the third quarter. The segment's operating gain of $785 million increased 26.6% year over year due to the improved medical underwriting performance in its commercial risk-based business. Operating margin increased 120 bps year over year to 7.5% in the quarter under review.
Government Business
Operating revenues of $24,571 million increased 13.4% year over year in the third quarter. Operating gain fell 10.2% year over year to $868 million. The downside can be attributed to increased operating expenses related to business growth initiatives. The operating margin of the segment came in at 3.5%, which fell 100 bps year over year.
IngenioRx
Operating revenues from the segment amounted to $7,249 million, up 10.7% year over year. Operating gain of $516 million jumped 16% year over year due to the increased prescription volumes related to the rising integrated medical and pharmacy members. Meanwhile, the operating margin increased 30 bps year over year to 7.1% in the quarter under review.
Other
Operating revenues of $3,365 million climbed 26% year over year. The segment reported an operating gain of $101 million, which increased from the prior-year quarter's figure of $27 million due to better Carelon's affiliated and unaffiliated earnings performance.
Financial Update (as of Sep 30, 2022)
Elevance Health exited the third quarter with cash and cash equivalents of $8,872 million, which increased from the $4,880 million level at 2021-end.
Long-term debt, less current portion totaled $21,258 million, marginally up from the 2021-end figure of $21,157 million. The current portion of the long-term debt was at $2,249 million, up from $1,599 million at 2021-end.
Net cash provided by operating activities in the first nine months of 2022 inched up 48.2% year over year to $9,917 million.
Capital Deployment
In the third quarter, Elevance Health bought back shares worth $579 million. ELV had around $2.4 billion remaining under its share buyback authorization as of Sep 30, 2022.
Elevance Health paid out a quarterly dividend of $1.28 per share in the third quarter, adding up to a distribution of cash worth $306 million. Its board of directors also announced a fourth-quarter 2022 dividend of $1.28 per share on Oct 18, 2022. The dividend will be paid on Dec 21, 2022, to shareholders of record as of Dec 5.
2022 Outlook
Adjusted net income is anticipated to be more than $28.95 per share, higher than the prior outlook of "greater than $28.70". The revised guidance indicates growth of 11.4% from the 2021 reported figure.
Previously management stated that operating revenues for 2022 were expected to be around $152 billion. Medical enrollment was projected in the range of 45.6 million to 46.2 million, which it had already surpassed with 47.3 million members. For the current year, investment income was forecasted to be $1.1 billion. Elevance Health anticipated its operating cash flow to be more than $6.9 billion.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
The consensus estimate has shifted -6.64% due to these changes.
VGM Scores
Currently, Elevance Health has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. However, the stock was allocated a grade of A on the value side, putting it in the top 20% 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 #2 (Buy). We expect an above average return from the stock in the next few months.
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Why Is Elevance Health (ELV) Down 5% Since Last Earnings Report?
A month has gone by since the last earnings report for Elevance Health (ELV - Free Report) . Shares have lost about 5% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Elevance Health due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Elevance Health Beats on Q3 Earnings, Ups '22 EPS View
Elevance Health Inc. (ELV Quick QuoteELV - Research Report) reported its third-quarter 2022 earnings of $7.53 per share, which outpaced the Zacks Consensus Estimate of $7.10 and our estimate of $7.12. The bottom line also improved 10.9% year over year.
Operating revenues of Elevance Health in the third quarter totaled $39,625 million, which rose 11.5% year over year. The top line also beat the consensus mark of $39,106 million and our estimate of $38,683 million.
The strong third-quarter results can be attributed to membership growth, increased premiums, and Medicaid business performance. Excellent performance in Commercial & Specialty Business and IngenioRx supported its results. The positives were partially offset by higher expenses.
Quarterly Operational Update
As of Sep 30, 2022, medical enrollment of Elevance Health amounted to roughly 47.3 million, which grew 4.9% year over year, driven by higher enrollment across Commercial & Specialty Businesses as well as Government Businesses. ELV's benefit expense ratio of 87.2% decreased 50 basis points (bps) year over year due to the realignment of some quality improvement expenses.
Premiums jumped 10.9% year over year to $33,722 million in the third quarter, beating our estimate of $33,235.3 million. Its product revenues rose 18.5% year over year to $3,972 million and beat our estimate of $3,464.3 million.
Net investment income increased 10.7% year over year to $371 million but missed our estimate of $386.7 million. Total operating margin declined 10 bps year over year to 5.7%.
The SG&A expense ratio increased 30 bps year over year to 11.4% in the quarter under review, attributable to higher spending to boost operations, partially offset by operating expense leverage linked with growing operating revenues. Total expenses of $37,793 million escalated 11.7% year over year due to increased benefit expenses, cost of products sold, and selling, general and administrative expenses. It was higher than our estimate of $37,006.8 million for the third quarter.
Segmental Results
Commercial & Specialty Business
Operating revenues improved 6.4% year over year to $10,494 million in the third quarter. The segment's operating gain of $785 million increased 26.6% year over year due to the improved medical underwriting performance in its commercial risk-based business. Operating margin increased 120 bps year over year to 7.5% in the quarter under review.
Government Business
Operating revenues of $24,571 million increased 13.4% year over year in the third quarter. Operating gain fell 10.2% year over year to $868 million. The downside can be attributed to increased operating expenses related to business growth initiatives. The operating margin of the segment came in at 3.5%, which fell 100 bps year over year.
IngenioRx
Operating revenues from the segment amounted to $7,249 million, up 10.7% year over year. Operating gain of $516 million jumped 16% year over year due to the increased prescription volumes related to the rising integrated medical and pharmacy members. Meanwhile, the operating margin increased 30 bps year over year to 7.1% in the quarter under review.
Other
Operating revenues of $3,365 million climbed 26% year over year. The segment reported an operating gain of $101 million, which increased from the prior-year quarter's figure of $27 million due to better Carelon's affiliated and unaffiliated earnings performance.
Financial Update (as of Sep 30, 2022)
Elevance Health exited the third quarter with cash and cash equivalents of $8,872 million, which increased from the $4,880 million level at 2021-end.
Long-term debt, less current portion totaled $21,258 million, marginally up from the 2021-end figure of $21,157 million. The current portion of the long-term debt was at $2,249 million, up from $1,599 million at 2021-end.
Net cash provided by operating activities in the first nine months of 2022 inched up 48.2% year over year to $9,917 million.
Capital Deployment
In the third quarter, Elevance Health bought back shares worth $579 million. ELV had around $2.4 billion remaining under its share buyback authorization as of Sep 30, 2022.
Elevance Health paid out a quarterly dividend of $1.28 per share in the third quarter, adding up to a distribution of cash worth $306 million. Its board of directors also announced a fourth-quarter 2022 dividend of $1.28 per share on Oct 18, 2022. The dividend will be paid on Dec 21, 2022, to shareholders of record as of Dec 5.
2022 Outlook
Adjusted net income is anticipated to be more than $28.95 per share, higher than the prior outlook of "greater than $28.70". The revised guidance indicates growth of 11.4% from the 2021 reported figure.
Previously management stated that operating revenues for 2022 were expected to be around $152 billion. Medical enrollment was projected in the range of 45.6 million to 46.2 million, which it had already surpassed with 47.3 million members. For the current year, investment income was forecasted to be $1.1 billion. Elevance Health anticipated its operating cash flow to be more than $6.9 billion.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
The consensus estimate has shifted -6.64% due to these changes.
VGM Scores
Currently, Elevance Health has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. However, the stock was allocated a grade of A on the value side, putting it in the top 20% 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 #2 (Buy). We expect an above average return from the stock in the next few months.