On Wednesday, Morgan Stanley (NYSE:MS) reiterated its Overweight rating on Elevance Health (NYSE:ELV) stock, with a maintained price target of $643.00.
The firm's analyst highlighted Elevance's second quarter 2024 adjusted earnings per share (EPS) of $10.12, which surpassed both Morgan Stanley's estimate of $10.03 and the consensus estimate of $10.01. Despite this performance, Elevance's management has chosen to keep its guidance for the year unchanged, emphasizing caution.
The company's Medical Loss Ratio (MLR) was slightly better than expected, coming in at 86.3% compared to the 86.4% projected by Morgan Stanley and the consensus. This beat is seen as a positive indicator for Managed Care Organizations (MCOs) that have yet to report their earnings. The analyst's focus for the upcoming conference call is set to be on the details behind the 10 basis points MLR beat.
Elevance's second quarter results showed varied performance across its different segments. The Health Benefits segment reported an operating margin of 5.8%, which was below the consensus estimate of 6.0%.
CarelonRx reported a 5.7% margin, which also did not meet the expected 6.3%. However, Carelon Services exceeded expectations with a 4.6% margin, against a consensus estimate of 3.9%.
The analyst's commentary provided ahead of the company's conference call suggests that if Elevance's Medicare Advantage (MA) and Medicaid (MDCD) businesses are experiencing cost trends in alignment with management's expectations, despite facing headwinds, it could be considered a positive sign for the industry.
Elevance Health is scheduled to discuss these details further during their conference call, which is set to begin at 8:30 am ET. The call is anticipated to provide additional insights into the company's performance and outlook.
In other recent news, Elevance Health reported a solid second-quarter 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. Analysts from Truist and TD Cowen maintained a positive stance on Elevance, reiterating a Buy rating and a price target of $620 and $624 respectively.
On the other hand, Morgan Stanley gave Elevance an Overweight rating with a price target set at $643, reflecting confidence in the company's diversified offerings and resilience. Meanwhile, Mizuho Securities raised Elevance's price target to $585 from $575, adjusting its adjusted earnings per share estimates for 2024 and 2025 by $0.10.
Despite a decrease in Medicaid-eligible individuals and operational shifts, Elevance managed to surpass Wall Street's quarterly profit expectations due to lower-than-anticipated medical costs for its members and an increase in membership for both Obamacare and its commercial health plans. These are recent developments that highlight the company's ability to navigate the changing dynamics in the healthcare landscape.
InvestingPro Insights
Morgan Stanley's recent endorsement of Elevance Health comes as the company showcases robust financial strength and a commitment to shareholder returns. InvestingPro data underscores this narrative with a market capitalization of $128.56 billion, reflecting the company's substantial presence in the healthcare industry. Additionally, Elevance's prudent fiscal management is highlighted by a consistent history of dividend growth, having raised its dividend for the last 13 consecutive years, a testament to its financial stability and reliability as an investment.
InvestingPro Tips further reveal that Elevance is trading at a high P/E ratio relative to near-term earnings growth, with a current P/E of 20.81 and an adjusted P/E of 18.04 for the last twelve months as of Q1 2024. The company's moderate level of debt and its ability to sufficiently cover interest payments provide investors with a measure of security. Moreover, the stock's low price volatility and its position as a prominent player in the Healthcare Providers & Services industry make it a potentially attractive option for investors seeking stable returns in a volatile market. For those considering an investment in Elevance Health, there are additional InvestingPro Tips available, offering deeper insights into the company's performance and prospects. Use coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription to access these valuable tips.
As Elevance Health continues to operate near its 52-week high, investors and analysts alike will be watching closely to see if the company can maintain its momentum in the face of industry challenges. With the next earnings date set for July 17, 2024, stakeholders will have their eyes set on whether the company can continue to exceed expectations and leverage its strong market position to deliver sustained growth.
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