Elevance Health (ELV) Q3 2024 earnings summary

Executive summary

• Q3 2024 operating revenue rose 5.3% year-over-year to $44.7B, driven by premium rate increases and CarelonRx growth, but net income fell 22.5% to $1.0B due to Medicaid attrition and higher medical costs.

• Adjusted diluted EPS for Q3 was $8.37, while GAAP diluted EPS was $4.36; adjusted operating gain was $2.4B, down 5.6% year-over-year.

• Medicaid cost trends are running 3-5x historical averages, driven by higher member acuity post-public health emergency redeterminations, leading to a benefit expense ratio of 89.5%.

• Commercial and Medicare businesses performed well, with commercial membership up nearly 600,000 year-over-year and strong ACA exchange growth offsetting Medicaid headwinds.

• Investments in AI, operational efficiency, and strategic acquisitions (e.g., Kroger Specialty Pharmacy, Paragon Healthcare, CareBridge) are expected to drive long-term growth.

Financial highlights

• Q3 2024 operating revenue was $44.7B (+5.3% YoY); adjusted operating gain was $2.4B (-5.6% YoY); net income was $1.0B (-22.5% YoY).

• Benefit expense ratio rose to 89.5%, up 270 bps year-over-year, mainly due to Medicaid cost trends.

• Adjusted operating expense ratio improved to 9.6%, down 150 bps year-over-year; operating expense ratio was 11.8%.

• Operating cash flow for Q3 was $2.7B, with full-year guidance at ~$4.5B.

• Cash, cash equivalents, and investments totaled $38.8B at September 30, 2024.

Outlook and guidance

• 2024 adjusted EPS guidance is ~$33; GAAP net income per diluted share expected to be ~$26.50.

• 2024 benefit expense ratio expected at ~88.5%, over 100 bps higher than prior guidance.

• 2025 adjusted EPS growth expected in the mid-single-digit % range, with revenue growth in the high single digits.

• Medicaid margins will remain below long-term targets in 2025, but commercial and Medicare margins are expected to be strong or improve.

• Long-term target of at least 12% annual adjusted EPS growth reaffirmed.