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Elevance Health's Q3 Earnings Miss Due to Medicaid Redeterminations
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Elevance Health, Inc. (ELV - Free Report) reported third-quarter 2024 adjusted earnings per share (EPS) of $8.37, which lagged the Zacks Consensus Estimate by 13.7%. The bottom line deteriorated 6.9% year over year.
Operating revenues of $44.7 billion rose 5.2% year over year. Moreover, the top line beat the consensus mark by 3.4%.
Quarterly earnings were impacted by rising expenses and a decline in Medicaid and Medicare membership. However, improved product revenues in the CarelonRx business and better premiums in the Health Benefits business partially offset the negatives.
Elevance Health, Inc. Price, Consensus and EPS Surprise
Medical membership of Elevance Health was around 45.8 million as of Sept. 30, 2024, which slipped 3.3% year over year. The decrease was due to attrition in its Medicaid business, partially offset by growth in commercial fee-based and risk-based businesses. The reported figure missed the Zacks Consensus Estimate of 45.9 million and our estimate of 46.4 million.
Premiums increased 4.4% year over year to $36.8 billion and came higher than the consensus mark of $35.4 billion and our estimate of $35.3 billion. Product revenues of $5.9 billion increased 13.7% year over year and came higher than the Zacks Consensus Estimate of $5.5 billion and our estimate of $5.2 billion.
Net investment income rose 11.8% year over year to $551 million, which surpassed the consensus mark of $493 million and our estimate of $509 million. Total operating margin deteriorated 100 basis points (bps) year over year to 3.1%.
Total expenses of $43.7 billion rose 6.2% year over year and were higher than our estimate of $40.6 billion. The year-over-year rise was due to higher benefit expenses and the cost of products sold.
The operating expense ratio improved 110 bps year over year to 11.8%. The benefit expense ratio of 89.5% deteriorated 270 bps year over year.
Segmental Results
Health Benefits
Operating revenues totaled $38.3 billion, which increased 4.4% year over year and beat the Zacks Consensus Estimate of $37.1 billion and our estimate of $36.8 billion.
Operating gain declined 11.1% year over year to $1.6 billion, lower than the consensus mark and our estimate of $2 billion. The operating margin of 4.2% deteriorated 80 bps year over year.
Carelon
The segment’s operating revenues amounted to $13.8 billion, which rose 15% year over year. The uptick was due to the introduction and expansion of risk-based medical benefits within Carelon Services, increased CarelonRx product revenues stemming from external members served and the Paragon Healthcare buyout in the first quarter. The reported figure outpaced the Zacks Consensus Estimate of $13.2 billion and our estimate of $12.8 billion.
The unit’s operating gain of $0.8 billion improved 14.3% year over year and was higher than the consensus mark and our estimate of $0.7 billion. The metric gained from product revenue growth and a one-time CarelonRx intra-year true-up. The operating margin improved 20 bps year over year to 5.8%.
Corporate & Other
Operating revenues deteriorated 22.1% year over year to $74 million in the third quarter. The unit incurred an operating loss of $999 million, wider than the prior-year quarter’s loss of $747 million.
Financial Details (as of Sept 30, 2024)
Elevance Health exited the third quarter with cash and cash equivalents of $7.9 billion, which rose 20.5% from the 2023-end level. Total assets of $116.5 billion increased 7% from the figure at 2023-end.
Long-term debt, less the current portion, amounted to $24.7 billion, up 6.5% from the figure as of Dec. 31, 2023. Short-term borrowings at the third-quarter end were $360 million while the current portion of the long-term debt amounted to $2.1 billion.
Total equity of $43.9 billion fell 11.4% from the 2023-end level.
ELV generated net cash flow from operations of $5.1 billion in the first nine months of 2024 compared with $11 billion in net cash in operations during the prior-year comparable period.
Capital Deployment Update
Elevance Health bought back shares worth $60 million in the third quarter. It had a leftover capacity of around $3.1 billion under its share buyback authorization as of Sept. 30, 2024. The board of directors on Oct. 15, 2024, authorized an increase of $8 billion to its share repurchase program.
ELV paid out a quarterly dividend of $1.63 per share, adding up to a cash distribution worth $378 million.
2024 Outlook
Revised Outlook
Adjusted EPS is now estimated at a minimum of $33, which indicates a deterioration of 0.4% from the 2023 figure. GAAP EPS is now projected to be a minimum of $26.5.
The benefits expense ratio is now projected to be near 88.5% and the operating cash flow to be $4.5 billion.
Prior Projections
Earlier, management estimated operating revenues to show flat to low single-digit growth in 2024. Premium revenues were projected to remain almost flat from the 2023 level. Medical enrollment was forecasted to be between 45.8 and 46.6 million.
Net investment income was expected to be $1.9 billion, while interest expenses were estimated to be $1.1 billion.
Operating cash flow was estimated to surpass the $8.1 billion level recorded in 2023.
It was also anticipated that the operating margin for the Health Benefits segment will increase 25-50 bps from the 2023 figure. Additionally, the operating margin for CarelonRx was expected to grow 40-60 bps, while the same for Carelon Services was projected to remain flat or decline up to 30 bps on a year-over-year basis.
2025 Outlook
ELV expects revenue growth to accelerate to a high-single-digit range in 2025. Adjusted EPS is anticipated to register growth of a minimum of mid-single digit growth rate.
ELV’s Zacks Rank
Elevance Health currently carries a Zacks Rank #2 (Buy).
A Medical Sector Release
Of the Medical sector players that have reported third-quarter results so far, the bottom line of UnitedHealth Group Incorporated (UNH - Free Report) beat the Zacks Consensus Estimate.
UnitedHealth Group reported a third-quarter 2024 adjusted EPS of $7.15, which surpassed the Zacks Consensus Estimate by 1.9%. The bottom line increased 9% year over year. Revenues rose 9.1% year over year to $100.8 billion, attributable to a higher number of people served through the UnitedHealthcare and Optum businesses. The top line beat the consensus mark by 1.3%.
UNH’s operating earnings grew 2.4% year over year to $8.7 billion. The net margin deteriorated 30 bps year over year to 6%. Revenues of the health benefits business of UnitedHealth, UnitedHealthcare, rose 7.2% year over year to $74.9 billion on the back of an increase in domestic membership growth.
Upcoming Releases
Here are some companies from the Medical space, which according to our model, have the right combination of elements to beat on earnings this time around:
Encompass Health’s earnings beat estimates in each of the trailing four quarters, the average surprise being 14.12%.
The Cigna Group (CI - Free Report) has an Earnings ESP of +0.08% and a Zacks Rank #3 (Hold) at present. The Zacks Consensus Estimate for CI’s third-quarter 2024 earnings is pegged at $7.22 per share, indicating a 6.7% rise from the prior-year quarter’s number.
Cigna’s earnings beat estimates in each of the trailing four quarters, the average surprise being 3.83%.
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Elevance Health's Q3 Earnings Miss Due to Medicaid Redeterminations
Elevance Health, Inc. (ELV - Free Report) reported third-quarter 2024 adjusted earnings per share (EPS) of $8.37, which lagged the Zacks Consensus Estimate by 13.7%. The bottom line deteriorated 6.9% year over year.
Operating revenues of $44.7 billion rose 5.2% year over year. Moreover, the top line beat the consensus mark by 3.4%.
Quarterly earnings were impacted by rising expenses and a decline in Medicaid and Medicare membership. However, improved product revenues in the CarelonRx business and better premiums in the Health Benefits business partially offset the negatives.
Elevance Health, Inc. Price, Consensus and EPS Surprise
Elevance Health, Inc. price-consensus-eps-surprise-chart | Elevance Health, Inc. Quote
Q3 Operational Update
Medical membership of Elevance Health was around 45.8 million as of Sept. 30, 2024, which slipped 3.3% year over year. The decrease was due to attrition in its Medicaid business, partially offset by growth in commercial fee-based and risk-based businesses. The reported figure missed the Zacks Consensus Estimate of 45.9 million and our estimate of 46.4 million.
Premiums increased 4.4% year over year to $36.8 billion and came higher than the consensus mark of $35.4 billion and our estimate of $35.3 billion. Product revenues of $5.9 billion increased 13.7% year over year and came higher than the Zacks Consensus Estimate of $5.5 billion and our estimate of $5.2 billion.
Net investment income rose 11.8% year over year to $551 million, which surpassed the consensus mark of $493 million and our estimate of $509 million. Total operating margin deteriorated 100 basis points (bps) year over year to 3.1%.
Total expenses of $43.7 billion rose 6.2% year over year and were higher than our estimate of $40.6 billion. The year-over-year rise was due to higher benefit expenses and the cost of products sold.
The operating expense ratio improved 110 bps year over year to 11.8%. The benefit expense ratio of 89.5% deteriorated 270 bps year over year.
Segmental Results
Health Benefits
Operating revenues totaled $38.3 billion, which increased 4.4% year over year and beat the Zacks Consensus Estimate of $37.1 billion and our estimate of $36.8 billion.
Operating gain declined 11.1% year over year to $1.6 billion, lower than the consensus mark and our estimate of $2 billion. The operating margin of 4.2% deteriorated 80 bps year over year.
Carelon
The segment’s operating revenues amounted to $13.8 billion, which rose 15% year over year. The uptick was due to the introduction and expansion of risk-based medical benefits within Carelon Services, increased CarelonRx product revenues stemming from external members served and the Paragon Healthcare buyout in the first quarter. The reported figure outpaced the Zacks Consensus Estimate of $13.2 billion and our estimate of $12.8 billion.
The unit’s operating gain of $0.8 billion improved 14.3% year over year and was higher than the consensus mark and our estimate of $0.7 billion. The metric gained from product revenue growth and a one-time CarelonRx intra-year true-up. The operating margin improved 20 bps year over year to 5.8%.
Corporate & Other
Operating revenues deteriorated 22.1% year over year to $74 million in the third quarter. The unit incurred an operating loss of $999 million, wider than the prior-year quarter’s loss of $747 million.
Financial Details (as of Sept 30, 2024)
Elevance Health exited the third quarter with cash and cash equivalents of $7.9 billion, which rose 20.5% from the 2023-end level. Total assets of $116.5 billion increased 7% from the figure at 2023-end.
Long-term debt, less the current portion, amounted to $24.7 billion, up 6.5% from the figure as of Dec. 31, 2023. Short-term borrowings at the third-quarter end were $360 million while the current portion of the long-term debt amounted to $2.1 billion.
Total equity of $43.9 billion fell 11.4% from the 2023-end level.
ELV generated net cash flow from operations of $5.1 billion in the first nine months of 2024 compared with $11 billion in net cash in operations during the prior-year comparable period.
Capital Deployment Update
Elevance Health bought back shares worth $60 million in the third quarter. It had a leftover capacity of around $3.1 billion under its share buyback authorization as of Sept. 30, 2024. The board of directors on Oct. 15, 2024, authorized an increase of $8 billion to its share repurchase program.
ELV paid out a quarterly dividend of $1.63 per share, adding up to a cash distribution worth $378 million.
2024 Outlook
Revised Outlook
Adjusted EPS is now estimated at a minimum of $33, which indicates a deterioration of 0.4% from the 2023 figure. GAAP EPS is now projected to be a minimum of $26.5.
The benefits expense ratio is now projected to be near 88.5% and the operating cash flow to be $4.5 billion.
Prior Projections
Earlier, management estimated operating revenues to show flat to low single-digit growth in 2024. Premium revenues were projected to remain almost flat from the 2023 level. Medical enrollment was forecasted to be between 45.8 and 46.6 million.
Net investment income was expected to be $1.9 billion, while interest expenses were estimated to be $1.1 billion.
Operating cash flow was estimated to surpass the $8.1 billion level recorded in 2023.
It was also anticipated that the operating margin for the Health Benefits segment will increase 25-50 bps from the 2023 figure. Additionally, the operating margin for CarelonRx was expected to grow 40-60 bps, while the same for Carelon Services was projected to remain flat or decline up to 30 bps on a year-over-year basis.
2025 Outlook
ELV expects revenue growth to accelerate to a high-single-digit range in 2025. Adjusted EPS is anticipated to register growth of a minimum of mid-single digit growth rate.
ELV’s Zacks Rank
Elevance Health currently carries a Zacks Rank #2 (Buy).
A Medical Sector Release
Of the Medical sector players that have reported third-quarter results so far, the bottom line of UnitedHealth Group Incorporated (UNH - Free Report) beat the Zacks Consensus Estimate.
UnitedHealth Group reported a third-quarter 2024 adjusted EPS of $7.15, which surpassed the Zacks Consensus Estimate by 1.9%. The bottom line increased 9% year over year. Revenues rose 9.1% year over year to $100.8 billion, attributable to a higher number of people served through the UnitedHealthcare and Optum businesses. The top line beat the consensus mark by 1.3%.
UNH’s operating earnings grew 2.4% year over year to $8.7 billion. The net margin deteriorated 30 bps year over year to 6%. Revenues of the health benefits business of UnitedHealth, UnitedHealthcare, rose 7.2% year over year to $74.9 billion on the back of an increase in domestic membership growth.
Upcoming Releases
Here are some companies from the Medical space, which according to our model, have the right combination of elements to beat on earnings this time around:
Encompass Health Corporation (EHC - Free Report) currently has an Earnings ESP of +0.13% and a Zacks Rank #2. The Zacks Consensus Estimate for EHC’s third-quarter 2024 earnings is 94 cents per share, implying 9.3% growth from the year-ago quarter’s figure. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Encompass Health’s earnings beat estimates in each of the trailing four quarters, the average surprise being 14.12%.
The Cigna Group (CI - Free Report) has an Earnings ESP of +0.08% and a Zacks Rank #3 (Hold) at present. The Zacks Consensus Estimate for CI’s third-quarter 2024 earnings is pegged at $7.22 per share, indicating a 6.7% rise from the prior-year quarter’s number.
Cigna’s earnings beat estimates in each of the trailing four quarters, the average surprise being 3.83%.