Elevance Health ($ELV) demonstrated resilience in its second-quarter financial performance, unveiling results that exceeded analyst expectations, though it faced a notable drop in Medicaid plan memberships. Chief Executive Gail Boudreaux explained that the health insurer is steadfast in maintaining its full-year earnings outlook, showcasing a commitment to navigating the complex dynamics within the industry. The company has adjusted its earnings projections, confidently stating an expectation of 'at least' $37.20 per share for the upcoming fiscal year 2024.
This marks a slight revision down from its previous carry-forward guidance of 'greater than' $37.20 in earnings per share (EPS). The consensus forecast among analysts on Capital IQ suggests a normalized EPS of $37.28, a figure that demonstrates the market's cautious optimism regarding Elevance's performance. During the earnings call, Boudreaux noted, 'We have prudently maintained our full-year outlook given industry-wide dynamics we are navigating in our Medicaid business and the investments we are making to support business transformation and deepen capabilities within CarelonRx.' This statement underscores the strategic direction Elevance is taking as it adapts to the evolving healthcare landscape.
"Our guidance for 2024 embeds significant investment in growth, notably in CarelonRx and government health plan operating margins below the long-term average with meaningful upside to our targets," she added, indicating a forward-looking approach to financial planning. Despite these strong earnings, the stock experienced a decline of 6.1% during Wednesday's trading session, emphasizing the volatile nature of the market. For the three-month period ending June 30, Elevance's adjusted EPS surged by 12% to reach $10.12, outpacing the general consensus prediction of $10.01 from the market analysts.
However, the company reported a modest year-over-year decline in operating revenue, which fell by 0.4% to $43.22 billion. This revenue figure exceeded analysts' estimates of $42.9 billion. The drop in revenue has been largely attributed to the loss of Medicaid memberships, although this decline was somewhat mitigated by improved premium yields as well as accelerated growth in CarelonRx product revenue. In terms of medical membership, the insurer experienced a reduction of 4.6%, bringing total enrollment to 45.8 million members.
This decline was primarily driven by a significant 23% decrease in its Medicaid business. However, there were positive developments in Affordable Care Act (ACA) health plans and a rise in commercial employer group fee-based membership. Notably, within its commercial risk-based segment, individual membership soared by 35%, while employer group participation decreased by 3.1%.
Overall, consolidated membership showed a slight decrease of 0.6% sequentially. Total premiums for Elevance fell by 3.2% to $35.42 billion, contrasting with a 14% increase in product revenue and an 18% spike in service fees. Breaking it down further, revenue from health benefits saw a slight decline of 2.2% to $37.16 billion, while the Carelon division exhibited robust growth, rising by 10% to achieve $13.3 billion. Elevance's benefit-expense ratio stood at 86.3%, reflecting a 10 basis point improvement compared to the same quarter last year.
This is an encouraging sign that operational efficiencies may be improving, despite the challenges faced in the Medicaid space. The company is adopting a vigilant approach to monitor trends related to acuity and costs, particularly within the Medicaid segment. CFO Mark Kaye emphasized during the call that Elevance is 'working collaboratively with states to ensure rates remain actuarially sound.' The company anticipates that Medicaid utilization will rise in the latter half of the year and expects its overall full-year benefit expense ratio to fall within the upper half of its initial guidance range, offering some reassurance to stakeholders as they navigate through uncertain economic conditions..