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Why Is Elevance Health (ELV) Down 3.4% 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 3.4% in that time frame, outperforming 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 the most recent earnings report in order to get a better handle on the important drivers.
Elevance Health Beats on Q2 Earnings, Ups '23 Profit View
Elevance Health reported second-quarter 2023 adjusted net income of $9.04 per share, which outpaced the Zacks Consensus Estimate by 2.5%. The bottom line improved 13.4% year over year.
ELV’s operating revenues, which amounted to $43,377 million, rose 12.7% year over year in the quarter under review. The top line surpassed the consensus mark by 4.5%.
The quarterly results gained from premium rate hikes in the Health Benefits business and a growing customer base within its Medicaid and Medicare businesses. Expanding external pharmacy members provided strength to pharmacy product revenues in the CarelonRx business, while the BioPlus acquisition in the quarter under review also contributed to the quarterly performance. However, the upside was partly offset by escalating costs.
Quarterly Operational Update
Medical membership of Elevance Health totaled around 48 million as of Jun 30, 2023, which increased 2% year over year in the second quarter and beat our estimate of 47.7 million. The growth came on the back of the expanding customer base across its Medicaid, BlueCard, ACA health plan and Medicare Advantage businesses.
The benefit expense ratio of 86.4% improved 70 basis points (bps) year over year and compared favorably with our estimate of 86.9%.
Premiums grew 10.6% year over year to $36,589 million in the quarter under review, higher than our estimate of $34,864.1 million. Product revenues of $4,859 million climbed 36.2% year over year.
Net investment income advanced 9.2% year over year to $416 million, higher than our estimate of $406 million. The total operating margin remained flat year over year at 6.1% in the second quarter.
Total expenses of $41,231 million increased 12.9% year over year due to increased benefit expenses, cost of products sold and operating costs. The operating expense ratio remained flat year over year at 11.1%.
Segmental Results
Health Benefits
The segment’s operating revenues of $38,000 million improved 10.5% year over year in the second quarter. Operating gain climbed 20.6% year over year to $2,148 million, higher than our estimate of $2,026.5 million. The improvement can be attributed to premium rate adjustments and higher membership in its Medicaid business. The operating margin of 5.7% improved 50 bps year over year in the quarter under review.
Carelon
Carelon gives aggregated results of CarelonRx and Carelon Services. Operating revenues of the segment were recorded at $11,907 million in the second quarter, which advanced 18.4% year over year. Operating gain of $632 million rose 6.8% year over year, thanks to a solid medical management business and the augmentation of post-acute care services. However, the metric fell short of our estimate of $685.2 million. The operating margin deteriorated 60 bps year over year to 5.3%.
Corporate & Other
Operating revenues of $287 million declined 8.9% year over year in the quarter under review. The segment reported an operating loss of $152 million which came wider than the prior-year quarter’s loss of $27 million due to increased unallocated corporate costs.
Financial Details (as of Jun 30, 2023)
Elevance Health exited the second quarter with cash and cash equivalents of $9,991 million, which climbed 35.3% from the 2022-end level.
Total assets of $109.2 billion rose 6.2% from the figure at 2022 end.
Long-term debt, less current portion, came in at $24,859 million, which increased 11.2% from the figure as of Dec 31, 2022. Short-term borrowings totaled $265 million at the second-quarter end, while there was no current portion of the long-term debt.
Total equity increased 5.5% from the 2022-end level to $38,312 million.
ELV generated cash flows from operations of $8,419 million in the first half of 2023, which soared 68.6% from the prior-year comparable period.
Capital Deployment
Elevance Health bought back shares worth $646 million in the second quarter. It had a leftover buyback capacity of around $5.6 billion under its share buyback authorization as of Jun 30, 2023.
ELV paid out a quarterly dividend of $1.48 per share, adding up to a cash distribution worth $350 million in the quarter under review.
2023 Outlook
On the basis of solid performance witnessed in the first half of 2023, management hiked its earnings guidance for this year.
Adjusted net income is forecasted to be more than $32.85 per share, up from the previous guidance of more than $32.70 per share and the 2022 reported figure of $29.07 per share.
GAAP net income is currently projected to be more than $29.09 per share.
Management earlier estimated operating revenues of $164 billion for 2023, which indicated an improvement of 5.4% from the 2022 figure. Premium revenues were expected to be $140 billion.
Medical enrollment was projected to be 47.4-48.5 million this year.
Net investment income was anticipated to be $1,600 million. Interest expenses were forecasted to be $1,000 million in 2023, while operating cash flows were likely to cross $7.6 billion.
Operating margins for the Health Benefits and Carelon Services segments were expected to witness an increase of 25-50 bps each from their respective 2022 reported figures. The same for the CarelonRx segment was projected to be unchanged from the 2022 level.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
VGM Scores
At this time, Elevance Health has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. 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 B. 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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Why Is Elevance Health (ELV) Down 3.4% Since Last Earnings Report?
A month has gone by since the last earnings report for Elevance Health (ELV - Free Report) . Shares have lost about 3.4% in that time frame, outperforming 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 the most recent earnings report in order to get a better handle on the important drivers.
Elevance Health Beats on Q2 Earnings, Ups '23 Profit View
Elevance Health reported second-quarter 2023 adjusted net income of $9.04 per share, which outpaced the Zacks Consensus Estimate by 2.5%. The bottom line improved 13.4% year over year.
ELV’s operating revenues, which amounted to $43,377 million, rose 12.7% year over year in the quarter under review. The top line surpassed the consensus mark by 4.5%.
The quarterly results gained from premium rate hikes in the Health Benefits business and a growing customer base within its Medicaid and Medicare businesses. Expanding external pharmacy members provided strength to pharmacy product revenues in the CarelonRx business, while the BioPlus acquisition in the quarter under review also contributed to the quarterly performance. However, the upside was partly offset by escalating costs.
Quarterly Operational Update
Medical membership of Elevance Health totaled around 48 million as of Jun 30, 2023, which increased 2% year over year in the second quarter and beat our estimate of 47.7 million. The growth came on the back of the expanding customer base across its Medicaid, BlueCard, ACA health plan and Medicare Advantage businesses.
The benefit expense ratio of 86.4% improved 70 basis points (bps) year over year and compared favorably with our estimate of 86.9%.
Premiums grew 10.6% year over year to $36,589 million in the quarter under review, higher than our estimate of $34,864.1 million. Product revenues of $4,859 million climbed 36.2% year over year.
Net investment income advanced 9.2% year over year to $416 million, higher than our estimate of $406 million. The total operating margin remained flat year over year at 6.1% in the second quarter.
Total expenses of $41,231 million increased 12.9% year over year due to increased benefit expenses, cost of products sold and operating costs. The operating expense ratio remained flat year over year at 11.1%.
Segmental Results
Health Benefits
The segment’s operating revenues of $38,000 million improved 10.5% year over year in the second quarter. Operating gain climbed 20.6% year over year to $2,148 million, higher than our estimate of $2,026.5 million. The improvement can be attributed to premium rate adjustments and higher membership in its Medicaid business. The operating margin of 5.7% improved 50 bps year over year in the quarter under review.
Carelon
Carelon gives aggregated results of CarelonRx and Carelon Services. Operating revenues of the segment were recorded at $11,907 million in the second quarter, which advanced 18.4% year over year. Operating gain of $632 million rose 6.8% year over year, thanks to a solid medical management business and the augmentation of post-acute care services. However, the metric fell short of our estimate of $685.2 million. The operating margin deteriorated 60 bps year over year to 5.3%.
Corporate & Other
Operating revenues of $287 million declined 8.9% year over year in the quarter under review. The segment reported an operating loss of $152 million which came wider than the prior-year quarter’s loss of $27 million due to increased unallocated corporate costs.
Financial Details (as of Jun 30, 2023)
Elevance Health exited the second quarter with cash and cash equivalents of $9,991 million, which climbed 35.3% from the 2022-end level.
Total assets of $109.2 billion rose 6.2% from the figure at 2022 end.
Long-term debt, less current portion, came in at $24,859 million, which increased 11.2% from the figure as of Dec 31, 2022. Short-term borrowings totaled $265 million at the second-quarter end, while there was no current portion of the long-term debt.
Total equity increased 5.5% from the 2022-end level to $38,312 million.
ELV generated cash flows from operations of $8,419 million in the first half of 2023, which soared 68.6% from the prior-year comparable period.
Capital Deployment
Elevance Health bought back shares worth $646 million in the second quarter. It had a leftover buyback capacity of around $5.6 billion under its share buyback authorization as of Jun 30, 2023.
ELV paid out a quarterly dividend of $1.48 per share, adding up to a cash distribution worth $350 million in the quarter under review.
2023 Outlook
On the basis of solid performance witnessed in the first half of 2023, management hiked its earnings guidance for this year.
Adjusted net income is forecasted to be more than $32.85 per share, up from the previous guidance of more than $32.70 per share and the 2022 reported figure of $29.07 per share.
GAAP net income is currently projected to be more than $29.09 per share.
Management earlier estimated operating revenues of $164 billion for 2023, which indicated an improvement of 5.4% from the 2022 figure. Premium revenues were expected to be $140 billion.
Medical enrollment was projected to be 47.4-48.5 million this year.
Net investment income was anticipated to be $1,600 million. Interest expenses were forecasted to be $1,000 million in 2023, while operating cash flows were likely to cross $7.6 billion.
Operating margins for the Health Benefits and Carelon Services segments were expected to witness an increase of 25-50 bps each from their respective 2022 reported figures. The same for the CarelonRx segment was projected to be unchanged from the 2022 level.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
VGM Scores
At this time, Elevance Health has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. 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 B. 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.