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Why You Should Retain Elevance (ELV) Stock in Your Portfolio
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Elevance Health, Inc. (ELV - Free Report) is positioned for growth with premium rate adjustments in the Health Benefits business, an expanding external pharmacy membership base and overall strength in the Carelon business. The BioPlus acquisition is expected to continue supporting the Carelon unit’s performance.
Elevance — with a market cap of $111.6 billion — is one of the largest publicly traded health benefits companies in the United States. Courtesy of solid prospects, this currently Zacks Rank #3 (Hold) stock is worth retaining in your portfolio at the moment.
Let’s delve deeper.
The Zacks Consensus Estimate for ELV’s 2023 earnings is pegged at $33.06 per share, indicating 13.7% year-over-year growth. The estimate has witnessed one upward movement in the past 60 days against none in the opposite direction. The company expects the long-term compound annual growth rate in EPS to be 12-15%. Elevance beat on earnings in all the last four quarters, with an average surprise of 2.9%. This is depicted in the graph below.
The consensus estimate for current-year revenues is $169.8 billion, indicating a 9.1% increase from the previous year. The expected improvement in product revenues, along with higher administrative fees and premiums, is poised to drive the company's top-line performance. The advantages of being an independent licensee of the Blue Cross and Blue Shield Association provide the company with a competitive edge.
Our projections for 2023 anticipate premiums to achieve more than 6% year-over-year growth. We expect product revenues to jump nearly 27% this year, while administrative fees and other revenues are expected to increase close to 8%. Also, its ROE of 20.7% is higher than the industry average of 16.2%, signaling superior management efficiency and effective utilization of shareholders' equity to generate returns. Although the company’s health benefits segment faced a headwind related to Medicaid redeterminations, it expects re-enrollment to improve in the coming quarters. This will lead to an improved rate of membership attrition in the future.
Considering the segments, we expect Health Benefits to witness more than 7% growth on the back of premium rate adjustments and BlueCard, vision and dental growth. Overall, Carelon will likely see a nearly 14% increase due to improving performance in post-acute care services and Behavioral Health business.
The company is expected to further boost Carelon’s capabilities with organic investments and acquisitions. We expect more partnerships and inorganic growth opportunities to present themselves in the coming days as the M&A scenario continues to improve. Carelon’s EnsureRx is expected to launch in early 2024, further bolstering CarelonRx’s capabilities.
The company’s shareholder value-boosting efforts are appreciated by investors. In the third quarter, ELV repurchased shares worth $480 million, maintaining approximately $5.1 billion in remaining capacity under its share buyback authorization as of Sep 30, 2023. Additionally, its dividend yield of 1.3% surpasses the industry average of 0.9%.
Key Concerns
There are a few factors that investors should keep an eye on.
For example, rising expenses are reducing its margins. In 2022, expenses jumped 13.9% year over year. We expect the metric to jump nearly 9% in 2023. Also, rising debt levels will keep boosting its interest expenses. Long-term debt, less of the current portion, was $24 billion at the third quarter-end, up 7.6% from the figure as of Dec 31, 2022. We expect interest expense to jump nearly 20% this year.
Nevertheless, we believe that a systematic and strategic plan of action will drive ELV’s growth in the long term.
The Zacks Consensus Estimate for Motus GI’s 2023 bottom line suggests a 67.2% year-over-year improvement. MOTS’s consensus estimate has remained stable in the past week. It beat earnings estimates in all the last four quarters, with an average surprise of 40.2%.
The Zacks Consensus Estimate for Brookdale Senior’s full-year 2023 earnings indicates a 49.6% year-over-year improvement. BKD beat earnings estimates in three of the past four quarters and missed once, with an average surprise of 23.5%.
The Zacks Consensus Estimate for Centene’s 2023 full-year earnings implies a 15.1% increase from the year-ago reported figure. The consensus mark for its current-year revenues is pegged at $150.8 billion, up 4.4% year over year. CNC beat earnings estimates in two of the last four quarters and missed twice, with an average surprise of 5.6%.
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Why You Should Retain Elevance (ELV) Stock in Your Portfolio
Elevance Health, Inc. (ELV - Free Report) is positioned for growth with premium rate adjustments in the Health Benefits business, an expanding external pharmacy membership base and overall strength in the Carelon business. The BioPlus acquisition is expected to continue supporting the Carelon unit’s performance.
Elevance — with a market cap of $111.6 billion — is one of the largest publicly traded health benefits companies in the United States. Courtesy of solid prospects, this currently Zacks Rank #3 (Hold) stock is worth retaining in your portfolio at the moment.
Let’s delve deeper.
The Zacks Consensus Estimate for ELV’s 2023 earnings is pegged at $33.06 per share, indicating 13.7% year-over-year growth. The estimate has witnessed one upward movement in the past 60 days against none in the opposite direction. The company expects the long-term compound annual growth rate in EPS to be 12-15%. Elevance beat on earnings in all the last four quarters, with an average surprise of 2.9%. This is depicted in the graph below.
Elevance Health, Inc. Price and EPS Surprise
Elevance Health, Inc. price-eps-surprise | Elevance Health, Inc. Quote
The consensus estimate for current-year revenues is $169.8 billion, indicating a 9.1% increase from the previous year. The expected improvement in product revenues, along with higher administrative fees and premiums, is poised to drive the company's top-line performance. The advantages of being an independent licensee of the Blue Cross and Blue Shield Association provide the company with a competitive edge.
Our projections for 2023 anticipate premiums to achieve more than 6% year-over-year growth. We expect product revenues to jump nearly 27% this year, while administrative fees and other revenues are expected to increase close to 8%. Also, its ROE of 20.7% is higher than the industry average of 16.2%, signaling superior management efficiency and effective utilization of shareholders' equity to generate returns. Although the company’s health benefits segment faced a headwind related to Medicaid redeterminations, it expects re-enrollment to improve in the coming quarters. This will lead to an improved rate of membership attrition in the future.
Considering the segments, we expect Health Benefits to witness more than 7% growth on the back of premium rate adjustments and BlueCard, vision and dental growth. Overall, Carelon will likely see a nearly 14% increase due to improving performance in post-acute care services and Behavioral Health business.
The company is expected to further boost Carelon’s capabilities with organic investments and acquisitions. We expect more partnerships and inorganic growth opportunities to present themselves in the coming days as the M&A scenario continues to improve. Carelon’s EnsureRx is expected to launch in early 2024, further bolstering CarelonRx’s capabilities.
The company’s shareholder value-boosting efforts are appreciated by investors. In the third quarter, ELV repurchased shares worth $480 million, maintaining approximately $5.1 billion in remaining capacity under its share buyback authorization as of Sep 30, 2023. Additionally, its dividend yield of 1.3% surpasses the industry average of 0.9%.
Key Concerns
There are a few factors that investors should keep an eye on.
For example, rising expenses are reducing its margins. In 2022, expenses jumped 13.9% year over year. We expect the metric to jump nearly 9% in 2023. Also, rising debt levels will keep boosting its interest expenses. Long-term debt, less of the current portion, was $24 billion at the third quarter-end, up 7.6% from the figure as of Dec 31, 2022. We expect interest expense to jump nearly 20% this year.
Nevertheless, we believe that a systematic and strategic plan of action will drive ELV’s growth in the long term.
Key Picks
Some better-ranked stocks in the Medical sector are Motus GI Holdings, Inc. (MOTS - Free Report) , Brookdale Senior Living Inc. (BKD - Free Report) and Centene Corporation (CNC - Free Report) . While Motus GI Holdings presently sports a Zacks Rank #1 (Strong Buy), Brookdale Senior Living and Centene Corporation carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Motus GI’s 2023 bottom line suggests a 67.2% year-over-year improvement. MOTS’s consensus estimate has remained stable in the past week. It beat earnings estimates in all the last four quarters, with an average surprise of 40.2%.
The Zacks Consensus Estimate for Brookdale Senior’s full-year 2023 earnings indicates a 49.6% year-over-year improvement. BKD beat earnings estimates in three of the past four quarters and missed once, with an average surprise of 23.5%.
The Zacks Consensus Estimate for Centene’s 2023 full-year earnings implies a 15.1% increase from the year-ago reported figure. The consensus mark for its current-year revenues is pegged at $150.8 billion, up 4.4% year over year. CNC beat earnings estimates in two of the last four quarters and missed twice, with an average surprise of 5.6%.