Elevance Health, Inc’s ELV higher consumers served, growing premiums, diversifying revenue base, the pursuit of buyouts, numerous contract wins and continued payment innovation make it worth retaining in one’s portfolio. Also, its favorable growth estimates are confidence boosters for investors.
The company is one of the largest health insurers in the United States in terms of medical membership, catering to 48 million medical members as of Mar 31, 2023. ELV is positioned to provide innovative and affordable products to customers.
Zacks Rank & Price Performance
ELV currently carries a Zacks Rank #3 (Hold). In the past month, the stock has shed less value than its industry. ELV’s shares have lost 1.1%, while the industry declined 2% during this period.
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Favorable Style Score
ELV carries an impressive VGM Score of A. Here V stands for Value, G for Growth and M for Momentum, and the score is a weighted combination of all three factors.
Optimistic Growth Projections
The Zacks Consensus Estimate for ELV’s 2023 earnings is pegged at $32.79 per share, indicating a 12.8% increase from the year-ago reported figure of $29.07. The same for ELV’s 2023 revenues is pegged at $166.5 billion, indicating a 7% increase from the year-ago reported figure of $155.7 billion.
Solid Return on Equity
Elevance Health’s efficiency in utilizing shareholders’ funds can be substantiated by its trailing 12-month return on equity of 20.1% as of Mar 31, 2023, which remains higher than the industry’s average of 15%.
Elevance’s top line increased 10.6% in the first quarter due to higher premiums from growing membership, rate increases and improving the Carelon segment. ELV’s continued efforts to optimize its mature businesses, invest in high-growth opportunities and expand its revenue source through the Carelon segment should continue to boost the top line in future. ELV expects operating revenues of $164 billion for 2023, suggesting 5.4% growth from the 2022 reported figure.
ELV’s Health Benefits and Carelon segments will continue to contribute toward revenue growth in the future. The Health Benefits business gained from membership growth and premium rate adjustments. However, Carelon’s business benefited from rising product revenues driven by growth in medical and pharmacy customers. An aging U.S. population is likely to sustain solid demand for the Medicare plans of Elevance Health. Its Medicare Advantage business is likely to register solid earnings growth this year, attributable to membership growth and improved operating margins. Operating margins for the Health Benefits and Carelon Services segments are anticipated to witness an increase of 25-50 basis points each from 2022 reported figures.
A series of acquisitions made over the years have expanded the business portfolio, diversified revenue streams and solidified the geographical footprint of Elevance Health. In February 2023, the company completed the acquisition of BioPlus, one of the largest independent specialty pharmacy organizations in the United States. This move is expected to benefit the CarelonRx segment by expanding its dispensing capacity in the future. BioPlus will also function as an in-network specialty pharmacy for ELV’s Medicaid and commercial contracts.
The company also earns by investing premiums and other revenue proceeds into interest-generating assets. ELV’s net investment income grew 7.5% in the first quarter. This metric is expected to rise further owing to a high-interest rate environment. The company expects this metric to grow to $1,600 million in 2023, implying a 7.7% rise from the 2022 figure.
ELV’s consistent dividend payouts and stock repurchases boost shareholders' value. It had a leftover capacity to repurchase shares worth around $6.3 billion as of Mar 31, 2023. Its dividend yield of 1.3% remains higher than the industry’s 0.9% average, making it an attractive potential investment for yield-seeking investors.
There are a few factors that are impeding the stock’s growth lately.
ELV’s total expenses rose 10.5% in the first quarter of 2023, mainly due to higher benefit expenses, the cost of products sold and operating costs. Rising costs can affect its margins.
The company’s growing debt level requires attention. Long-term debt, less current portion, was $25,201 million at the first-quarter end, up 12.8% from the 2022-end level, while cash and cash equivalents amounted to only $10,142 million. Nevertheless, we believe that a systematic and strategic plan of action will drive growth in the long term.
Stocks to Consider
Some better-ranked stocks from the Medical Services space are Apollo Medical Holdings, Inc. AMEH, Life Time Group Holdings, Inc. LTH and Medpace Holdings, Inc. MEDP. Apollo Medical sports a Zacks Rank #1 (Strong Buy), while Life Time Group and Medpace Holdings carry a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Apollo Medical’s 2023 earnings indicates 2.6% year-over-year growth. The Zacks Consensus Estimate for AMEH’s 2023 earnings has moved 3.5% north in the past 30 days.
The Zacks Consensus Estimate for Life Time Group 2024 earnings indicates 48.8% year-over-year growth. The Zacks Consensus Estimate for LTH’s 2024 earnings has moved 24.5% north in the past 30 days.
The Zacks Consensus Estimate for Medpace Holdings 2023 earnings indicates 11.4% year-over-year growth. The Zacks Consensus Estimate for MEDP’s 2023 earnings has moved 5.7% north in the past 30 days.
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