On Thursday, Elevance Health Inc. (NYSE:ELV) experienced a slight adjustment in its stock outlook as Jefferies altered the company's price target. The new price target is set at $600, decreased from the previous $604, while the firm maintained a Buy rating on the shares. This revision arrives amidst concerns related to Medicaid, which has also affected other players in the industry like UnitedHealth Group (NYSE:UNH).
The management of Elevance is reportedly applying similar strategies to those used by UNH to mitigate these pressures, notably through reductions in selling, general, and administrative (SG&A) expenses. Despite the larger exposure Elevance has in comparison to its peers, which adds to the pressure, the company's management is optimistic about compensating for this through a discrete $750 million cost reduction plan spanning from 2023 to 2025.
The analyst's note highlighted the stability in Medicare Advantage (MA) and Commercial (Comml) segments as factors that should help maintain the company's earnings per share (EPS) for the year 2025. Although there is an anticipated reduction in EPS, it is estimated to be around 2%. This is seen as a relatively minor impact, suggesting confidence in the company's ability to leverage its SG&A and maintain financial performance.
The revised price target reflects these considerations, with the valuation multiple remaining largely unchanged. The analysis indicates that despite the current challenges, Elevance's strategic cost management and stable performance in key areas are expected to support its value in the market.
In other recent news, Elevance Health reported a robust Q2 performance with an operating revenue of $43.22 billion and an adjusted EPS of $10.12, surpassing both Truist's estimate and the consensus. The company's Medical Loss Ratio (MLR) of 86.3% modestly surpassed estimates, attributed to rate adjustments and robust commercial underwriting. Elevance's health services platform, Carelon, exhibited an 8.0% year-over-year growth, driven by strong performance in Carelon Services.
Analysts from Truist, TD Cowen, and Morgan Stanley maintained a positive stance on Elevance, reiterating a Buy rating and a price target of $620, $624, and $643 respectively. These ratings reflect confidence in the company's financial preparedness and diversified offerings.
Elevance's recent developments also include strategic partnerships, such as a collaboration with the private equity firm Clayton, Dubilier & Rice to expand its primary care services. Mizuho Securities raised Elevance's price target to $585, adjusting its adjusted earnings per share estimates for 2024 and 2025 by $0.10.
InvestingPro Insights
Amidst the adjustments in market outlook for Elevance Health Inc. (NYSE:ELV), key financial metrics and strategic maneuvers provide a more detailed picture of the company's current position. With a market capitalization of $121.07 billion and a P/E ratio of 19.43, Elevance stands as a significant entity in the healthcare industry. Notably, the company has a track record of raising its dividend for 13 consecutive years, emphasizing its commitment to shareholder returns. Additionally, Elevance's stock has been trading near its 52-week high, which aligns with the stable Medicare Advantage and Commercial segments that analysts have highlighted.
InvestingPro Tips indicate that Elevance's management has been actively buying back shares and has maintained dividend payments for 14 consecutive years, reinforcing the confidence in the company's financial health and management strategies. Moreover, with a dividend yield of 1.25% and a recent dividend growth of over 10%, the company demonstrates a robust payout policy. For investors seeking a deeper analysis and additional insights, InvestingPro offers more tips on Elevance Health, which can be accessed at: https://www.investing.com/pro/ELV. To enhance your investment strategy with these insights, use the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription. There are 12 additional InvestingPro Tips available, providing a comprehensive view of Elevance's financial and operational performance.
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