Elevance Health Inc (ELV) Q3 2024 Earnings Call Highlights: Revenue Growth Amid Medicaid Challenges

GuruFocus News
4 min read

In This Article:

  • Adjusted Diluted Earnings Per Share (EPS): $8.37 for Q3 2024, below expectations.

  • GAAP Diluted EPS: $4.36 for Q3 2024.

  • Total Operating Revenue: $44.7 billion, up over 5% year-over-year.

  • Benefit Expense Ratio: 89.5% for Q3 2024, an increase of 270 basis points year-over-year.

  • Adjusted Operating Expense Ratio: 9.6%, an improvement of 150 basis points.

  • Adjusted Operating Gain: $2.4 billion for Q3 2024 and $8.3 billion year-to-date.

  • Membership: 45.8 million members, flat sequentially; commercial membership grew by nearly 600,000 year-over-year.

  • Days in Claims Payable: 42.8 days, slightly above the targeted range.

  • Full Year Outlook for Adjusted Diluted EPS: Reduced to approximately $33.

  • Full Year Operating Cash Flow: Expected to be approximately $4.5 billion.

Release Date: October 17, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

  • Elevance Health Inc (NYSE:ELV) reported strong revenue growth of over 5% year-over-year, reaching $44.7 billion for the third quarter.

  • The company is expanding its individual and family ACA plans in three states, which is expected to drive growth in its health benefits and Carelon segments.

  • CarelonRx continues to expand its customer base and recently closed the acquisition of Kroger Specialty Pharmacy, aligning with its strategy to deliver whole health affordably.

  • Elevance Health Inc (NYSE:ELV) is investing in AI-driven solutions to enhance member and provider experiences, reduce costs, and improve operational efficiency.

  • The company is confident in its long-term growth strategy, expecting to deliver at least 12% growth in adjusted diluted earnings per share annually over time.

Negative Points

  • Elevance Health Inc (NYSE:ELV) reported adjusted diluted earnings per share of $8.37, which was below expectations due to elevated medical costs in its Medicaid business.

  • The company has reduced its full-year outlook for adjusted diluted earnings per share to approximately $33, reflecting challenges in the operating environment.

  • Medicaid cost trends are developing worse than expected, with trends running 3 to 5 times historical averages, leading to inadequate rate coverage.

  • The percentage of members in Medicare Advantage plans rated four stars or higher is expected to decline due to higher cut points.

  • Elevance Health Inc (NYSE:ELV) is facing a timing disconnect between Medicaid rates and acuity, which is expected to persist through 2025, impacting margins.

Q & A Highlights

Q: You're reiterating your expectation of 12% earnings growth from '22 to '27. Is getting the right Medicaid rate sufficient to achieve this growth, or should we rebase expectations? A: Gail Boudreaux, President and CEO, emphasized that the earnings power of Elevance Health's diverse businesses remains strong. They expect strong revenue growth and are confident in achieving at least 12% EPS growth over time. However, Medicaid margins in '25 are expected to remain below long-term targets due to timing disconnects between rates and acuity.

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