3. Elevance Health, Inc. (NYSE:ELV)
Number of Hedge Fund Holders: 73
Elevance Health, Inc. (NYSE:ELV) offers telehealth services to its customers, reporting in 2024 that the company conducted more than 800,000 virtual visits in 2023. This health company operates through the following segments: Health Benefits, CarelonRx, Carelon Services, and Corporate and Other. The Health Benefits segment offers a range of health plans and services, while the CarelonRx segment manages pharmacy services. The Carelon Services segment offers various healthcare-related services by integrating behavioral, physical, pharmacy, and social services.
On April 18, Leerink Partners analyst Whit Mayo reiterated a Buy rating on Elevance Health, Inc. (NYSE:ELV) and set a price target of $463.00. The analyst expressed confidence in the company’s full-year estimates, which remain unaffected despite the ongoing investor concern regarding Medicaid margin recovery and cost trends.
The company also has solid operations. It reported $45.0 billion in operating revenue in fiscal Q4 2024, reflecting an increase of $2.5 billion, or 6%, compared to the prior-year quarter. Operating income for the year reached $175.2 billion, up $5.0 billion, or 3%. This growth was attributed to higher premium yields in Elevance Health, Inc.’s (NYSE:ELV) Health Benefits segment, growth in CarelonRx product revenue, and acquisitions undertaken in 2024.
Artisan Select Equity Fund stated the following regarding Elevance Health, Inc. (NYSE:ELV) in its Q4 2024 investor letter:
“Elevance Health, Inc. (NYSE:ELV) took a couple of blows this quarter. First, it warned that its Medicaid earnings would come in below expectations this year. The Medicaid business has been in the spotlight as a result of COVID-19. Medicaid rolls filled up during the pandemic, but then rolls started to come down as enrollees lost eligibility when the economy began normalizing. This has made estimating the severity and health trends of the remaining population difficult. So far this year, cost trends have been much worse than expected and are out of line with Elevance’s approved rate structure. Margins in the Medicaid business, therefore, will be down this year, and overall profits are likely to be flat. We believe this is a temporary situation. State Medicaid programs are legally required to pay actuarially sound rates to the providers of Medicaid services, such as Elevance. Rates are expected, therefore, to move upward over the next 12 to 18 months, restoring Elevance’s margins to a more normal level.
The second issue for Elevance is investor sentiment. A mentally deranged young man murdered top executive of United Healthcare, the largest health insurer in the country. This led to an Internet frenzy of vicious, inaccurate and, frankly, deplorable criticisms of health insurance companies and their executives. Negative and controversial headlines tend to hurt share prices. This was true of Elevance’s stock in the aftermath of this heinous crime. The share price has fallen to extremely attractive levels, trading currently at about 11X earnings. We added to our position during this weakness.”
