News

Elevance Health, Inc. ELV reported second-quarter 2024 adjusted earnings of $10.12 per share, which outpaced the Zacks Consensus Estimate by 1.3%. The bottom line improved 12% year over year.

Operating revenues of $43.2 billion dipped 0.4% year over year. However, the top line beat the consensus mark by 0.5%.

The quarterly results were driven by improved product revenues in the CarelonRx business and a significant rise in net investment income. However, the upside was partly offset by a decline in Medicaid and Medicare membership and reduced premium revenues, thus impacting overall margins.

Elevance Health, Inc. Price, Consensus and EPS Surprise

Elevance Health, Inc. price-consensus-eps-surprise-chart | Elevance Health, Inc. Quote

Q2 Operational Update

Medical membership of Elevance Health was around 45.8 million as of Jun 30, 2024, which slipped 5% year over year. The decrease was due to attrition in its Medicaid business, partially offset by growth in commercial fee-based business. The reported figure missed the Zacks Consensus Estimate of 46.2 million and our estimate of 46.4 million.

Premiums decreased 3.2% year over year to $35.4 billion and came lower than the consensus mark of $35.8 billion and our estimate of $35.6 billion. Product revenues of $5.5 billion advanced 13.8% year over year, higher than the Zacks Consensus Estimate of $5.1 billion and our estimate of $5.2 billion. Net investment income climbed 22.1% year over year to $508 million, which surpassed the consensus mark of $474.6 million and our estimate of $451.4 million. Total operating margin improved 30 bps year over year to 6.4%.

Total expenses of $40.9 billion dipped 0.8% year over year but were higher than our estimate of $40.5 billion. The year-over-year decline was due to lower benefit expenses and the amortization of other intangible assets.

The operating expense ratio deteriorated 60 basis points (bps) year over year to 11.7%. The benefit expense ratio of 86.3% improved 10 bps year over year.

Segmental Results

Health Benefits

Operating revenues totaled $37.2 billion, which decreased 2.2% year over year and fell short of the Zacks Consensus Estimate of $37.3 billion and our estimate of $37.5 billion.

Operating gain remained almost flat year over year at $2.1 billion, lower than the consensus mark of $2.25 billion and our estimate of $2.23 billion. The operating margin of 5.8% improved 20 bps year over year.

Carelon

The segment’s operating revenues amounted to $13.3 billion, which rose 10% year over year. The uptick was due to the introduction and expansion of risk-based medical benefit and behavioral health management services 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 $12.8 billion and our estimate of $12.9 billion.

The unit’s operating gain of $705 million advanced 8% year over year, lower than the consensus mark of $720.3 million but surpassing our estimate of $697.2 million. The metric gained from the enhanced performance in risk-based arrangements within Carelon Services. The operating margin deteriorated 10 bps year over year to 5.3%.

Corporate & Other

Operating revenues improved 8.9% year over year to $122 million in the second quarter. The unit incurred an operating loss of $85 million, narrower than the prior-year quarter’s loss of $163 million.

Financial Details (as of Jun 30, 2024)

Elevance Health exited the second quarter with cash and cash equivalents of $6.5 billion, which dipped 0.4% from the 2023-end level. Total assets of $113 billion increased 3.7% from the figure at 2023 end.

Long-term debt, less the current portion, amounted to $24.6 billion, up 5.7% from the figure as of Dec 31, 2023. Short-term borrowings at the second-quarter end were $225 million while the current portion of the long-term debt amounted to $2.9 billion.

Total equity of $42.3 billion rose 7.3% from the 2023-end level.

ELV generated net cash flow from operations of $2.4 billion in the first half of 2024 against usage of $8.4 billion of net cash in operations during the prior-year comparable period.

Capital Deployment Update

Elevance Health bought back shares worth $462 million in the second quarter. It had a leftover capacity of around $3.2 billion under its share buyback authorization as of Jun 30, 2024.

ELV paid out a quarterly dividend of $1.63 per share, adding up to a cash distribution worth $378 million.

2024 Outlook

Earnings View Reiterated

Adjusted earnings continue to be estimated at a minimum of $37.20 per share, which indicates an improvement of 12% from the 2023 figure. GAAP earnings continue to be projected to be a minimum of $34.05 per share.

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.

Zacks Rank

Elevance Health currently carries a Zacks Rank #2 (Buy).

A Medical Sector Release

Of the Medical sector players that have reported second-quarter results so far, the bottom line of UnitedHealth Group Incorporated UNH beat the Zacks Consensus Estimate.

UnitedHealth Group reported second-quarter adjusted earnings per share of $6.80, which beat the Zacks Consensus Estimate by 2.3%. The bottom line rose 10.7% year over year. Revenues amounted to $98.9 billion, which improved 6.4% year over year. The top line outpaced the consensus mark of $98.7 billion. The medical care ratio of UNH deteriorated 190 bps year over year to 85.1%.

UNH’s operating earnings deteriorated 2.3% year over year to $7.9 billion. The net margin deteriorated to 4.3% compared with 5.9% in the year-ago period. The health benefits business, UnitedHealthcare, generated revenues of $73.9 billion. The figure rose 5.3% year over year. The unit served 50.4 million people as of Jun 30, 2024, which decreased 4.6% year over year

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:

Hims & Hers Health, Inc. HIMS has an Earnings ESP of +19.28% and a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for HIMS’ second-quarter 2024 earnings is 5 cents per share. A loss of 3 cents per share was reported in the prior-year quarter. Hims & Hers' earnings beat estimates in three of the trailing four quarters and missed the mark once, the average surprise being 79.17%.

The Cigna Group CI has an Earnings ESP of +1.59% and a Zacks Rank of 2 at present. The Zacks Consensus Estimate for CI’s second-quarter 2024 earnings is $6.42 per share, implying 4.7% growth from the year-ago quarter’s reported figure.

Cigna’s earnings beat estimates in each of the trailing four quarters, the average surprise being 3.29%.

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UnitedHealth Group Incorporated (UNH) : Free Stock Analysis Report

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