Elevance Health (ELV) Q2 Earnings Beat on Higher Premiums
Elevance Health Inc. ELV reported second-quarter 2022 earnings of $8.04 per share, which outpaced the Zacks Consensus Estimate of $7.72. The bottom line also improved 14.4% year over year.
Operating revenues of Elevance Health in the second quarter totaled $38,482 million, which rose 15.6% year over year. The top line also beat the consensus mark of $38,120 million.
The strong second-quarter results can be attributed to membership growth across the Commercial & Specialty Business as well as the Government Business, increased premiums, and adjusted premium rates in Medicare. The company has bumped up its premium rates to cover the rising cost trends. ELV recently changed its name from Anthem, in line with its rebranding strategy.
Elevance Health, Inc. Price, Consensus and EPS Surprise
Elevance Health, Inc. price-consensus-eps-surprise-chart | Elevance Health, Inc. Quote
Quarterly Operational Update
As of Jun 30, 2022, medical enrollment of Elevance Health amounted to roughly 47.1 million, which grew 6.1% year over year, driven by higher enrollment across Commercial & Specialty Business as well as Government Business. ELV's benefit expense ratio of 87% increased 20 basis points (bps) year over year due to the persistent shift in the business mix.
Premiums jumped 15.9% year over year to $33,076 million in the second quarter, while product revenues rose 17.3% year over year to $3,568 million. However, net investment income declined 4.8% to $381 million. Total operating margin declined 10 bps year over year to 6.2%.
The SG&A expense ratio improved 40 bps year over year to 11.1% in the quarter under review, attributable to operating expense leverage linked with growing operating revenues. Total expenses of $36,489 million escalated 15.8% year over year due to increased benefit expenses, cost of products sold, selling, and general and administrative expenses.
Segmental Results
Commercial & Specialty Business
Operating revenues improved 10.6% year over year to $10,561 million in the second quarter.
The segment's operating gain of $806 million increased 1.9% year over year due to the contribution from risk-and-fee-based membership growth. Operating margin deteriorated 70 bps year over year to 7.6% in the quarter under review.
Government Business
Operating revenues of $23,835 million climbed 18.8% year over year in the second quarter.
Operating gain rose 14.7% year over year to $996 million. The upside can be attributed to the rise in Medicaid membership and higher premium rates of Medicare. The operating margin of the segment came in at 4.2%, which fell 10 bps year over year.
IngenioRx
Operating revenues from the segment amounted to $7,071 million, up 13.7% year over year.
Operating gain of $479 million jumped 18.3% year over year due to the increased prescription volumes related to the rising integrated medical and pharmacy members. Meanwhile, operating margin increased 30 bps year over year to 6.8% in the quarter under review.
Other
Operating revenues of $3,298 million climbed 31% year over year.
The segment reported an operating gain of $86 million, which increased from the prior-year quarter's figure of $17 million due to better Carelon's affiliated and unaffiliated earnings performance.
Financial Update (as of Jun 30, 2022)
Elevance Health exited the second quarter with cash and cash equivalents of $6,456 million, which increased 32.3% from the level of 2021 end.
Long-term debt, less current portion totaled $21,165 million, marginally up from the 2021-end figure of $21,157 million. The current portion of the long-term debt was at $2,248 million, up from $1,599 million at 2021-end. At second-quarter end, the company had debt-to-capital of 39.7%.
Net cash provided by operating activities in the first half of 2022 inched up 19.2% year over year to $4,993 million.
Capital Deployment
In the second quarter, Elevance Health bought back shares worth $624 million. ELV had around $3 billion remaining under its share buyback authorization as of Jun 30, 2022. The company bought back $1.2 billion worth of shares in the first half, and has a target of $1.5 billion for the full year.
Elevance Health paid out a quarterly dividend of $1.28 per share in the second quarter, adding up to a distribution of cash worth $309 million. Meanwhile, its board of directors announced a third-quarter 2022 dividend of $1.28 per share on Jul 19, 2022. The dividend will be paid on Sep 23, 2022, to shareholders of record as of Sep 9.
2022 Outlook
Adjusted net income is anticipated to be more than $28.70 per share, higher than the prior outlook of "greater than $28.40." The revised guidance indicates growth of 10.5% from the 2021 reported figure.
Earlier, management had stated that operating revenues for 2022 were expected around $152 billion. Medical enrollment, which was projected in the range of 45.6 million to 46.2 million, surpassed with 47.1 million members. For the current year, investment income was forecast at $1.1 billion. Elevance Health anticipated its operating cash flow of more than $6.9 billion.
Zacks Rank & Key Picks
Elevance Health currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader medical space are AMN Healthcare Services, Inc. AMN, Teladoc Health, Inc. TDOC and Medpace Holdings, Inc. MEDP, each carrying a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Headquartered in Dallas, TX, AMN Healthcare provides different types of healthcare workforce solutions in the United States. The Zacks Consensus Estimate for AMN’s 2022 bottom line indicates a 29.6% increase from the prior-year reported number.
Based in Purchase, NY, Teladoc Health is a leading provider of virtual healthcare services. The Zacks Consensus Estimate for TDOC’s 2022 revenues indicates 19.1% year-over-year growth.
Cincinnati, OH-based Medpace works as a global clinical research-based drug and medical device developer. The Zacks Consensus Estimate for MEDP’s 2022 bottom line indicates 22.7% year-over-year growth.
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