RBC Capital Markets adjusted its price target for Elevance Health Inc. (NYSE:ELV), reducing it to $478 from the previous $585, while continuing to recommend the stock as Outperform. The adjustment came after the company's announcement of a decrease in its earnings per share (EPS) guidance for 2024. In addition, Elevance projected a mid-single-digit EPS growth for 2025, a figure that is notably lower than its previous long-term growth goal of over 12%.
The shares of Elevance experienced a downturn today following the company's updated financial outlook. Despite the reduction in EPS guidance and growth expectations, RBC Capital's long-term perspective on the company remains positive. The firm recognizes the current challenges with Medicaid mix headwinds as temporary and believes that the underlying value of the company is intact.
RBC Capital has revised its fiscal year 2025 EPS estimate for Elevance, which has influenced the new price target. The revised estimate takes into account the near-term uncertainties associated with the timing mismatch in Medicaid acuity. The firm's decision to maintain an Outperform rating indicates a belief that Elevance's stock will perform well in the long run despite the current headwinds.
The lowered price target of $478 reflects RBC Capital's recalibrated expectations based on the recent guidance provided by Elevance's management. While the near-term outlook has introduced some uncertainty, the Outperform rating suggests that the investment firm sees potential for Elevance's shares to outpace the average market performance in the foreseeable future.
Elevance Health Inc. is currently navigating through a period of adjustment, as indicated by the revised guidance figures. Investors are being apprised of the changes and RBC Capital's outlook, which, despite the adjustments, continues to signal confidence in the company's prospects beyond the immediate challenges.
Elevance Health has reported a lower than expected Q3 2024 earnings, with adjusted diluted EPS of $8.37, due to increased medical costs in its Medicaid business. The company has adjusted its full-year outlook for adjusted EPS to approximately $33, reflecting these ongoing Medicaid challenges. Despite this, Elevance Health reported a 5% increase in total operating revenue to $44.7 billion and a significant growth in commercial membership by nearly 600,000 year-over-year.
Truist Securities has revised its outlook for Elevance Health and reduced its price target from $620 to $520, while maintaining a Buy rating. This adjustment was made following Elevance's recent earnings report and a lower than expected guide for 2024 and a preliminary view for 2025. Truist Securities remains optimistic about Elevance's long-term prospects, highlighting the company's commitment to a 12% or higher adjusted EPS Compound Annual Growth Rate (CAGR).
Elevance Health is projecting strong revenue growth in 2025 and beyond, anticipating growth in individual Medicare Advantage membership for 2025 and expecting continued growth in the commercial business.
InvestingPro Insights
Recent data from InvestingPro sheds additional light on Elevance Health's financial position and market performance. Despite the recent downturn in share price, with a 1-week total return of -11.46% and a 1-month return of -17.63%, Elevance Health maintains a strong market presence with a market capitalization of $103.04 billion.
The company's financial health appears robust, with a revenue of $174.22 billion over the last twelve months as of Q3 2024, representing a growth of 3.32%. This growth, coupled with an adjusted P/E ratio of 14.11, suggests that the stock may be undervalued relative to its earnings potential, aligning with RBC Capital's continued Outperform rating.
InvestingPro Tips highlight that Elevance Health has raised its dividend for 14 consecutive years, with a current dividend yield of 1.47%. This consistent dividend growth, along with management's aggressive share buybacks, indicates a strong commitment to returning value to shareholders. Additionally, the company's RSI suggests the stock is in oversold territory, which could present a potential buying opportunity for investors who share RBC Capital's long-term optimistic view.
For readers interested in a deeper analysis, InvestingPro offers 13 additional tips for Elevance Health, providing a comprehensive view of the company's financial health and market position.
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