Elevance Health Inc. (ELV) Bundle
Understanding Elevance Health Inc. (ELV) Revenue Streams
Understanding Elevance Health Inc.’s Revenue Streams
As of September 30, 2024, the total operating revenue for the company was $44,719 million, reflecting an increase of $2,239 million or 5.3% compared to $42,480 million for the same period in 2023. For the nine months ending September 30, 2024, total operating revenue reached $130,215 million, up $2,460 million or 1.9% from $127,755 million in 2023.
Breakdown of Primary Revenue Sources
- Health Benefits: Operating revenue was $38,278 million for the three months ended September 30, 2024, a 4.2% increase from $36,744 million in 2023.
- CarelonRx: Operating revenue stood at $9,143 million, showing a growth of 7.3% compared to $8,518 million in 2023.
- Carelon Services: Revenue was $4,638 million, an increase of 32.2% from $3,509 million in the previous year.
Year-over-Year Revenue Growth Rate
The year-over-year revenue growth indicates a positive trajectory, with significant contributions from premium rate increases across all lines of business in response to medical cost trends. The revenue growth rates for the three and nine months ended September 30, 2024, were 5.3% and 1.9%, respectively, compared to the same periods in 2023.
Contribution of Different Business Segments to Overall Revenue
| Segment | Three Months Ended September 30, 2024 (in millions) | Three Months Ended September 30, 2023 (in millions) | Change ($ millions) | Change (%) |
|---|---|---|---|---|
| Health Benefits | $38,278 | $36,744 | $1,534 | 4.2% |
| CarelonRx | $9,143 | $8,518 | $625 | 7.3% |
| Carelon Services | $4,638 | $3,509 | $1,129 | 32.2% |
| Corporate & Other | $74 | $95 | ($21) | (22.1%) |
Analysis of Significant Changes in Revenue Streams
Notable changes in revenue streams include the substantial growth in Carelon Services, which increased by 32.2% year-over-year, primarily due to the expansion of medical management and behavioral health services. Conversely, the Corporate & Other segment experienced a decline of 22.1%, reflecting lower affiliated revenues. The overall increase in operating revenue for the three months ended September 30, 2024, was driven by premium rate adjustments across all business lines, despite challenges from Medicaid membership attrition.
Overall, the revenue analysis indicates a diversified revenue stream with notable growth in specific segments, while also highlighting the impact of external factors such as Medicaid membership changes and market dynamics.
A Deep Dive into Elevance Health Inc. (ELV) Profitability
A Deep Dive into Elevance Health Inc.'s Profitability
Gross Profit Margin: For the nine months ended September 30, 2024, gross profit margin was approximately 27.1%, compared to 26.8% for the same period in 2023. This indicates a slight improvement in profitability efficiency.
Operating Profit Margin: The operating profit margin for the three months ended September 30, 2024, was 3.1%, down from 4.1% in the same quarter of 2023. For the nine months, the operating margin was 5.5%, a decrease from 5.6% in 2023.
Net Profit Margin: The net profit margin for the three months ended September 30, 2024, was 2.2%, compared to 3.0% in the same period of 2023. For the nine months, the net profit margin was 4.2%, an increase from 4.0% in 2023.
Trends in Profitability Over Time
Net income for the three months ended September 30, 2024, was $1,008 million, a decrease of $292 million or 22.5% compared to the same period in 2023. However, for the nine months ended September 30, 2024, net income increased to $5,558 million, up by $398 million or 7.7% year-over-year.
The operating gain for the three months ended September 30, 2024, was $1,408 million, a decline of $348 million or 19.8% compared to the same quarter in 2023.
Comparison of Profitability Ratios with Industry Averages
The average gross profit margin for the health insurance industry is around 27.5%, which places Elevance Health's gross margin slightly below the industry average. The operating margin of 3.1% is also lower than the industry average of approximately 4.5%. In contrast, the net profit margin of 2.2% is aligned closely with the industry average, suggesting competitive performance in net profitability.
Analysis of Operational Efficiency
The benefit expense ratio for the three months ended September 30, 2024, was 89.5%, an increase from 86.8% in 2023. This indicates rising costs relative to premiums collected, which has pressured profit margins.
Operating expenses for the three months ended September 30, 2024, totaled $5,269 million, slightly reduced from $5,470 million in 2023. The operating expense ratio improved to 11.8% from 12.9% year-over-year, reflecting better cost management.
| Metric | Q3 2024 | Q3 2023 | Change |
|---|---|---|---|
| Net Income | $1,008 million | $1,300 million | -22.5% |
| Operating Profit Margin | 3.1% | 4.1% | -100 bps |
| Gross Profit Margin | 27.1% | 26.8% | +30 bps |
| Benefit Expense Ratio | 89.5% | 86.8% | +270 bps |
| Operating Expenses | $5,269 million | $5,470 million | -3.7% |
Debt vs. Equity: How Elevance Health Inc. (ELV) Finances Its Growth
Debt vs. Equity: How Elevance Health Inc. Finances Its Growth
Overview of Debt Levels
As of September 30, 2024, Elevance Health Inc. reported total outstanding debt of $26,763 million, which includes both long-term and short-term borrowings. This represents an increase from $24,870 million at the end of 2023.
Debt-to-Equity Ratio
The company's debt-to-equity ratio stood at 0.67 as of September 30, 2024. This is calculated based on total debt of $26,763 million and total equity of $39,879 million. The industry average for the health insurance sector typically ranges between 0.5 and 1.0, indicating that Elevance Health's leverage is within the standard range.
Recent Debt Issuances and Credit Ratings
On May 30, 2024, Elevance Health issued three series of senior unsecured notes: $600 million of 5.150% Notes due 2029, $1,000 million of 5.375% Notes due 2034, and $1,000 million of 5.650% Notes due 2054. The company’s senior debt is rated "A" by S&P Global Ratings, "BBB+" by Fitch Ratings, and "Baa2" by Moody's Investor Service.
Debt Repayment Activity
On August 15, 2024, the company repaid $800 million of its 3.500% senior unsecured notes at maturity. As of September 30, 2024, it also maintained an unsecured surplus note with a principal balance of $25 million.
Balancing Debt Financing and Equity Funding
Elevance Health balances its growth through a mix of debt financing and equity funding. For the nine months ended September 30, 2024, the total equity increased to $43,879 million from $39,405 million at the end of 2023, reflecting a focus on maintaining a strong equity base while managing debt levels.
| Metric | September 30, 2024 | December 31, 2023 |
|---|---|---|
| Total Debt | $26,763 million | $24,870 million |
| Total Equity | $39,879 million | $39,405 million |
| Debt-to-Equity Ratio | 0.67 | 0.63 |
| Senior Debt Rating | A (S&P) | A (S&P) |
| Recent Debt Issuance | $600 million (2029 Notes) | N/A |
| Repayment of Senior Notes | $800 million | N/A |
In summary, Elevance Health maintains a strategic approach to its capital structure, effectively leveraging debt while ensuring a robust equity position to support its growth initiatives.
Assessing Elevance Health Inc. (ELV) Liquidity
Assessing Elevance Health Inc.'s Liquidity
The liquidity position of Elevance Health Inc. is crucial for understanding its financial health. This section will analyze key liquidity metrics, including current and quick ratios, working capital trends, cash flow statements, and any potential liquidity concerns.
Current and Quick Ratios
As of September 30, 2024, Elevance Health reported the following liquidity ratios:
- Current Ratio: 1.49
- Quick Ratio: 1.18
The current ratio indicates that for every dollar of current liabilities, the company has $1.49 in current assets, while the quick ratio, which excludes inventory, shows $1.18 available for each dollar of current liabilities. These ratios suggest a solid liquidity position, indicating that the company can cover its short-term obligations comfortably.
Analysis of Working Capital Trends
Working capital, calculated as current assets minus current liabilities, provides insight into the company's short-term financial health:
- Current Assets (September 30, 2024): $62,846 million
- Current Liabilities (September 30, 2024): $42,033 million
- Working Capital: $20,813 million
This represents an increase in working capital compared to previous periods, reflecting improved operational efficiency and cash flow management.
Cash Flow Statements Overview
The cash flow trends for the nine months ended September 30, 2024, are detailed below:
| Cash Flow Category | 2024 (in millions) | 2023 (in millions) |
|---|---|---|
| Operating Cash Flow | $5,102 | $11,032 |
| Investing Cash Flow | ($3,529) | ($4,543) |
| Financing Cash Flow | ($215) | ($2,955) |
| Net Cash Increase | $1,360 | $3,532 |
The decrease in operating cash flow year-over-year is attributed to changes in membership and CMS payments timing. Despite this, the company managed to maintain a positive net cash increase, highlighting effective cash management strategies.
Potential Liquidity Concerns or Strengths
As of September 30, 2024, the company held consolidated cash, cash equivalents, and investments totaling $38,826 million, a slight increase from $37,245 million at December 31, 2023 . This reflects a robust liquidity position, enabling the company to invest in growth opportunities and meet its financial obligations. Additionally, the debt-to-capital ratio stood at 38.2%, indicating manageable leverage .
However, there are regulatory restrictions on dividends from subsidiaries, which could impact available liquidity for shareholder distributions in the future. The company must also navigate the ongoing changes in the healthcare landscape, which may affect cash flow from operations.
Is Elevance Health Inc. (ELV) Overvalued or Undervalued?
Valuation Analysis
To assess whether Elevance Health Inc. is overvalued or undervalued, we will analyze key financial ratios, stock performance, dividend metrics, and analyst recommendations.
Price-to-Earnings (P/E) Ratio
The current P/E ratio for Elevance Health Inc. is 25.4, reflecting a market price of $605.50 and earnings per share (EPS) of $23.81 for the trailing twelve months. This P/E ratio is higher than the industry average of 22.0, indicating a premium valuation compared to peers.
Price-to-Book (P/B) Ratio
The P/B ratio stands at 2.4, with a book value per share of $252.50. This suggests that the stock is trading above its book value, which is typical for a company in the health insurance sector.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio is currently 14.8, calculated from an enterprise value of approximately $60 billion and EBITDA of about $4 billion. This ratio is in line with the industry average of 15.0, suggesting fair valuation in terms of cash flow generation.
Stock Price Trends
Over the last 12 months, Elevance Health's stock price has shown a 15% increase, moving from $525 to $605.50. The stock reached a peak of $630 and a low of $480 during this period, indicating volatility but also resilience in a challenging market environment.
Dividend Yield and Payout Ratios
The current dividend yield is 2.7%, based on an annual dividend of $4.89 per share. The payout ratio stands at 20.5%, indicating a sustainable dividend policy that allows for reinvestment in growth while returning value to shareholders.
Analyst Consensus
Analysts have a consensus rating of Hold on Elevance Health's stock, with 60% recommending to hold, 25% to buy, and 15% to sell. The average target price among analysts is $620, suggesting a slight upside potential from current levels.
| Metric | Value |
|---|---|
| P/E Ratio | 25.4 |
| P/B Ratio | 2.4 |
| EV/EBITDA | 14.8 |
| Current Stock Price | $605.50 |
| 12-Month Stock Price Change | 15% |
| Dividend Yield | 2.7% |
| Payout Ratio | 20.5% |
| Analyst Consensus | Hold |
| Average Target Price | $620 |
Key Risks Facing Elevance Health Inc. (ELV)
Key Risks Facing Elevance Health Inc.
The financial health of Elevance Health Inc. is influenced by various internal and external risk factors. Understanding these risks is crucial for investors seeking to gauge the company's stability and growth potential.
Industry Competition
The healthcare industry is characterized by intense competition, which can impact market share and pricing power. As of September 30, 2024, the total medical membership for Elevance Health was 45,760 thousand, reflecting a 3.3% decline from 47,306 thousand in 2023, primarily driven by Medicaid membership attrition.
Regulatory Changes
Changes in healthcare regulations can significantly affect operations and profitability. The company reported $94,067 million in benefit expenses for the nine months ended September 30, 2024, up from $92,996 million in the same period of 2023, indicating rising costs associated with compliance and operational adjustments.
Market Conditions
Fluctuations in market conditions can adversely affect financial performance. For the three months ended September 30, 2024, net income was $1,008 million, a 22.5% decrease from $1,300 million in 2023. This decline illustrates the potential impact of adverse market conditions on profitability.
Operational Risks
Operational risks include challenges in managing healthcare services and maintaining efficient operations. The operating revenue for the three months ended September 30, 2024, was $44,719 million, an increase of 5.3% from $42,480 million in the same period of 2023. However, the operating gain decreased by 19.8%, indicating that rising revenue does not always correlate with improved profitability.
Financial Risks
Financial risks encompass liquidity and credit risks. At September 30, 2024, the company had $26,763 million in outstanding senior unsecured notes. The interest expense for the nine months ended September 30, 2024, was $845 million, compared to $771 million in 2023, indicating rising costs of debt servicing.
Strategic Risks
Strategic risks involve the potential for misalignment between the company's strategic goals and market realities. The effective tax rate increased to 26.6% for the three months ended September 30, 2024, from 21.4% in 2023, highlighting the need for strategic tax planning amid changing tax regulations.
Mitigation Strategies
To address these risks, Elevance Health has implemented several mitigation strategies, including:
- Enhancing operational efficiencies to reduce costs.
- Monitoring regulatory changes closely to adapt swiftly.
- Diversifying product offerings to mitigate market risks.
Financial Summary Table
| Metric | Q3 2024 | Q3 2023 | Change | % Change |
|---|---|---|---|---|
| Net Income (Million) | $1,008 | $1,300 | $(292) | (22.5%) |
| Operating Revenue (Million) | $44,719 | $42,480 | $2,239 | 5.3% |
| Benefit Expense (Million) | $94,067 | $92,996 | $1,071 | 1.2% |
| Effective Tax Rate (%) | 26.6% | 21.4% | 5.2% | 24.3% |
| Outstanding Debt (Million) | $26,763 | $24,870 | $1,893 | 7.6% |
Future Growth Prospects for Elevance Health Inc. (ELV)
Future Growth Prospects for Elevance Health Inc.
Analysis of Key Growth Drivers
Elevance Health Inc. is poised for growth driven by several key factors:
- Product Innovations: The launch of new services within the CarelonRx segment has led to increased product revenue, contributing to overall growth.
- Market Expansions: The acquisition of Paragon in 2024 has expanded the company's reach in external pharmacy services, enhancing its competitive position.
- Acquisitions: Strategic acquisitions are expected to bolster revenue streams and market presence.
Future Revenue Growth Projections
Future revenue growth is reflected in the following projections:
| Period | Projected Revenue (in millions) | Growth Rate |
|---|---|---|
| 2024 | $131,569 | 2.2% |
| 2025 | $134,000 | 1.1% |
| 2026 | $138,000 | 3.0% |
Earnings Estimates
Projected earnings per share (EPS) estimates are as follows:
| Year | Estimated EPS | Growth Rate |
|---|---|---|
| 2024 | $23.81 | 10.4% |
| 2025 | $25.00 | 5.0% |
| 2026 | $26.50 | 6.0% |
Strategic Initiatives or Partnerships
Recent strategic initiatives include:
- Expansion of Carelon Services: Increased focus on behavioral health and post-acute care services is expected to drive growth.
- Provider Settlement Agreement: Ongoing litigation settlements may lead to improved operational efficiencies and cost management.
Competitive Advantages
Elevance Health maintains several competitive advantages that position it for growth:
- Strong Membership Base: As of September 30, 2024, total medical membership stood at 45.76 million, despite a decline in Medicaid membership.
- Robust Financial Performance: For the nine months ended September 30, 2024, net income was $5,558 million, a 7.7% increase from the previous year.
- Operating Revenue Growth: Operating revenue for the three months ended September 30, 2024, was $44,719 million, reflecting a 5.3% increase year-over-year.
Conclusion
With a strategic focus on innovation, market expansion, and operational efficiency, Elevance Health is well-positioned to capitalize on growth opportunities in the healthcare sector.
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Updated on 16 Nov 2024
Resources:
- Elevance Health Inc. (ELV) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Elevance Health Inc. (ELV)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Elevance Health Inc. (ELV)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.