On Wednesday, Mizuho Securities adjusted its financial outlook on Elevance Health Inc (NYSE:ELV), raising the stock's price target to $585 from the previous $575 while reaffirming a Buy rating. The firm's decision follows an analysis of Elevance's adjusted earnings per share (EPS) estimates for the coming years, taking into account the company's recent performance and strategic partnerships.
The updated stock price target comes after Mizuho increased its adjusted EPS estimates for Elevance for 2024 and 2025 by $0.10, setting them at $37.30 and $41.60, respectively. Despite this adjustment, the firm's 2026 EPS forecast remains unchanged at $46.35, indicating an 11% year-over-year growth.
Mizuho's Medical Loss Ratio (MLR) estimate for Elevance stands firm at 87.0% for 2024, bolstered by a first-quarter MLR of 85.6% that aligned with expectations.
Elevance's recent collaboration with the private equity firm Clayton, Dubilier & Rice (CD&R) aims to expand its primary care services. Mizuho sees this move as a positive step and a logical expansion of Elevance's existing value-based and primary care offerings. However, the firm does not anticipate the partnership to significantly influence Elevance's financial results for 2024.
The valuation of $585 is derived from a blend of price-to-earnings (P/E), enterprise value to EBITDA (EV/EBITDA), and free cash flow to enterprise value (FCF/EV) multiples. Based on this approach, the P/E multiple for Elevance's 2024 adjusted EPS is projected at 15.7 times, slightly higher than the managed care group's two-year average of 15.6 times. For the 2025 adjusted EPS, the P/E multiple is about 14.1 times, which is also marginally above Elevance's ten-year average of 14 times.
InvestingPro Insights
As Elevance Health Inc (NYSE:ELV) continues to attract attention with its strategic initiatives and financial performance, data from InvestingPro provides further context to its market position. With a market capitalization of $123.86 billion and a P/E ratio of 20.12, the company stands out as a substantial player in the Healthcare Providers & Services industry.
The adjusted P/E ratio for the last twelve months as of Q1 2024 is 17.38, which, while indicating a high valuation relative to near-term earnings growth, also reflects the company's robust financial health.
Elevance's commitment to shareholder returns is evident from its track record of raising its dividend for 13 consecutive years, with a current dividend yield of 1.22%. This, coupled with a dividend growth of 10.14% in the last twelve months as of Q1 2024, underscores the company's financial stability and dedication to providing consistent returns to its investors. Moreover, the stock's low price volatility suggests it could be a suitable option for investors seeking stability in their portfolio.
InvestingPro Tips highlight that Elevance's cash flows can sufficiently cover interest payments, and the company operates with a moderate level of debt, which is reassuring for long-term investors. For those seeking to delve deeper into Elevance's financials and future prospects, there are additional tips available on InvestingPro, which can be accessed with a special offer. Use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, and explore the numerous other tips that can guide your investment decisions.
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