Elevance Health, Inc. (ELV), a prominent health insurance provider valued at a $125.94 billion market cap, delivered a solid financial performance in the first quarter of fiscal 2024. The company reported operating revenue of $42.30 billion, up nearly 1% year-over-year, primarily driven by higher premium yields to reflect medical cost trend and growth in Carelon.
Furthermore, Elevance Health posted an adjusted EPS of $10.64 for the first quarter, beating analysts’ estimate of $10.53.
Gali K. Boudreaux, President and CEO of ELV, stated, “First quarter results reflect disciplined execution of our strategic initiatives during a dynamic time for our industry. We are making significant progress expanding Carelon’s capabilities, scaling our flywheel for enterprise growth, and delivering results for all stakeholders. Given the solid start to the year, we have increased our outlook for full year earnings.”
For the fiscal year 2024, the company raised its EPS and adjusted EPS guidance to more than $34.05 and $37.20, respectively.
ELV recently announced a partnership with Clayton, Dubilier & Rice (CD&R) to accelerate innovation in primary care delivery, enhance the healthcare experience, and improve health outcomes. This effort, which will operate across multiple regions of the U.S., will bring together certain care delivery and enablement assets of Elevance Health’s Carelon Health and CD&R portfolio companies.
Moreover, in March, ELV completed the acquisition of Paragon Healthcare, Inc., a company specializing in life-saving and life-giving infusible and injectable therapies. This strategic acquisition will deepen Elevance Health’s capabilities around offering affordable, convenient access to specialty medications for people with chronic and complex illnesses.
Shares of ELV have gained 5.3% over the past month to close the last trading session at $541.86. Also, the stock has surged 15.6% over the past six months and 24% over the past year.
Let’s look at factors that could influence ELV’s performance in the upcoming months.
Thriving Healthcare Insurance Industry
The increasing number of elderly individuals and the rising prevalence of chronic diseases drive the demand for comprehensive health insurance coverage and associated healthcare services. Also, the healthcare industry is heavily influenced by government policies aimed at increasing healthcare access.
According to a Mordor Intelligence report, the U.S. health and medical insurance market is projected to total $1.50 trillion this year. It is expected to reach $2.01 trillion by 2029, expanding at a CAGR of greater than 6% from 2024 to 2029. The robust market growth will benefit Elevance Health significantly.
Solid Financial Performance
For the first quarter that ended March 31, 2024, ELV reported a total operating revenue of $42.27 billion, with an operating revenue for Carelon of $12.08 billion, an increase of 5.2% over the prior year’s quarter. Its adjusted net income and EPS came in at $2.49 billion and $10.64, up 9.9% and 12.5% year-over-year, respectively.
Furthermore, as of March 31, 2024, the company’s cash and cash equivalents stood at $6.23 billion, and its total current assets were $60.95 billion.
Favorable Analyst Expectations
Analysts expect ELV’s revenue for the third quarter (ending September 2024) to grow marginally year-over-year to $42.81 billion. The consensus EPS estimate of $9.82 for the same period indicates a 9.3% year-over-year increase. Also, the company has surpassed consensus EPS estimates in all four trailing quarters, which is impressive.
For the fiscal year ending December 2024, Street expects ELV’s revenue and EPS to grow 0.8% and 12.5% from the prior year to $171.58 billion and $37.27, respectively. In addition, the company’s revenue and EPS for the fiscal year 2025 are expected to increase 6.3% and 11.8% year-over-year to $182.33 billion and $41.65, respectively.
Accelerating Profitability
ELV’s trailing-12-month EBIT margin of 5.95% is 218.5% higher than the 1.87% industry average. Similarly, its trailing-12-month EBITDA margin of 6.49% is 11.5% higher than the industry average of 5.83%. Further, the stock’s trailing-12-month net income margin of 3.64% compared to the industry average of negative 3.89%.
Moreover, the stock’s trailing-12-month ROCE and ROTC of 16.02% and 9.76% are unfavorably compared to the industry averages of negative 38.88% and negative 19.50%, respectively.
Low Valuation
In terms of forward non-GAAP P/E, ELV is trading at 14.54x, 23.3% lower than the industry average of 18.96x. The stock’s forward EV/Sales multiple of 0.85 is 75.1% lower than the industry average of 3.42. Likewise, its forward EV/EBIT of 11.86x is 24.5% lower than the industry average of 15.71x.
Additionally, the stock’s forward Price/Sales multiple of 0.73 is 79.3% lower than the industry average of 3.54. Its forward EV/EBITDA of 10.94x is 15% lower than the industry average of 12.88x.
POWR Ratings Reflect Promise
ELV’s good fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to Buy in our proprietary rating system. The POWR Ratings are calculated by taking into account 118 different factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. ELV has a B grade for Stability, justified by its 24-month beta of 0.31. The stock also has a B grade for Sentiment, consistent with its favorable analyst estimates.
Within the Medical-Health Insurance industry, ELV is ranked #4 out of 11 stocks.
Beyond what I have stated above, we have also given ELV grades for Growth, Momentum, Quality, and Value. Get all ELV ratings here.
Bottom Line
ELV is one of the largest health insurers in the U.S., holding a significant share of the healthcare market. Following a solid financial performance in the last reported quarter, the company raised its outlook for full-year earnings. With a robust market position, diverse product portfolio, strategic partnerships and acquisitions, and technological innovation, ELV’s prospects appear bright.
Given Elevance Health’s sound financials, accelerating profitability, low valuation, and rosy long-term outlook, it could be wise to invest in this stock now.
How Does Elevance Health, Inc. (ELV) Stack Up Against Its Peers?
While ELV has an overall POWR Rating of B, investors could also check out these other stocks within the Medical-Health Insurance industry with B (Buy) ratings: Centene Corp. (CNC), Cigna Corp. (CI), and Molina Healthcare Inc. (MOH).
To explore more A and B-rated healthcare stocks, click here.
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ELV shares were trading at $542.98 per share on Monday morning, up $1.12 (+0.21%). Year-to-date, ELV has gained 15.87%, versus a 15.39% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.
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