Elevance lifts 2026 profit forecast on disciplined cost management

Oct 21 — Elevance Health on Wednesday raised its annual profit forecast after posting ​better-than-expected quarterly results, helped by lower medical costs.

Health insurers have been navigating declining membership, as well as rising costs in government-backed plans. Elevance, like other health insurers, has ‌adjusted its pricing to reflect higher medical costs.

For the third quarter, the company said higher premium yields and service fees offset ⁠lower membership, helping the company's insurance business ​post a $1.1 billion rise in revenue from a ⁠year earlier.

Elevance forecast full-year adjusted profit to be at least $29 per share, compared with its ‌previous outlook of at least $27 ‌per share. Analysts on average estimate an annual profit of $27.23 per share, according ⁠to data compiled by LSEG.

"Our earnings foundation is stronger, and ⁠we're entering 2027 with greater visibility and greater momentum," CEO Gail Boudreaux said in a conference call with analysts.

For 2027, the company expects to deliver at least 12% growth in adjusted profit when compared to its earnings baseline of at least $26.75 per share.

The company's adjusted quarterly profit was $6.99 per share, above expectations of $4.68 per share.

Baird analyst Michael Ha said ‌although Elevance delivered a large beat-and-raise, the smaller lift to ​recurring earnings leaves the stock vulnerable to a fade.

Shares were down 1.3% in morning trading, after rising roughly 2% premarket post results.

LOWER MEDICAL COSTS

For the third quarter, the health insurer reported a medical loss ratio, the percentage of premiums spent on medical care, of 90.6%, better than analysts' expectations of 91.17%.

The company said lower costs were due to better performance across its government-backed plans compared to the prior year.

The company expects Medicaid margins to improve in ​2027 as reimbursement rates become better aligned with elevated cost trends.

Meanwhile, membership at its insurance unit declined by ‌487,000 compared with ‌last year to ⁠about 44.9 million as of September 30, the company said.

The company also named Jeff Park as president of Carelon, its health services business, effective December 1.

"Carelon's pharmacy and services businesses are growing earnings while managing a larger share of the health plans' medical spending. That supports management's integrated strategy ‌and helps offset pressure on ​insurance profits," said Daniel Barasa, portfolio manager at Gabelli ‌Funds.

The unit reported operating revenue ⁠of $19.3 billion, an ​increase of $1 billion from the prior year.

(Reporting by Kamal Choudhury and Sneha S K in Bengaluru; Editing ​by Leroy Leo)

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