Will a Strong MA Business Aid Elevance Health's Q1 Earnings?

Elevance Health, Inc. ELV is scheduled to release first-quarter 2025 results on April 22, before the opening bell. The Zacks Consensus Estimate for earnings is pegged at $11.09 per share, which indicates an improvement of 4.2% from the prior-year quarter’s number.  (See the Zacks Earnings Calendar to stay ahead of market-making news.)

The first-quarter earnings estimate has witnessed three upward estimate revisions against no downward movements over the past 30 days. Meanwhile, the Zacks Consensus Estimate for revenues is pegged at $46 billion, implying 8.7% growth from the year-ago quarter’s figure.

Elevance Health’s Earnings Surprise History

ELV’s bottom line beat estimates in three of the trailing four quarters and missed the mark once, the average negative surprise being 2.60%. This is depicted in the chart below:

Elevance Health, Inc. Price and EPS Surprise

Elevance Health, Inc. price-eps-surprise | Elevance Health, Inc. Quote

What Our Quantitative Model Unveils for ELV

Our proven model predicts an earnings beat for Elevance Health this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat, which is the case here.

Earnings ESP: Elevance Health has an Earnings ESP of +4.75% because the Most Accurate Estimate of $11.62 per share is pegged higher than the Zacks Consensus Estimate of $11.09. You can uncover the best stocks before they’re reported with our Earnings ESP Filter.

Zacks Rank: ELV currently carries a Zacks Rank of 3. 

Factors Likely to Shape ELV’s Q1 Results

Elevance Health’s results are likely to have gained from higher premiums, which, in turn, are anticipated to have resulted from strong Medicare Advantage membership growth. Strength in Carelon businesses is expected to have contributed to higher product revenues. 

The Zacks Consensus Estimate for premiums is pegged at $38.7 billion, which indicates a rise of 8.3% from the prior-year quarter’s number. The consensus mark for Medicare Advantage membership implies 9.8% year-over-year growth. The consensus estimate for product revenues is $5.1 billion, which indicates an improvement of 13.6% from the year-ago period’s reported figure. We expect premiums and product revenues to increase 6.8% and 3.8%, respectively, in the first quarter. 

In the to-be-reported quarter, the Health Benefits segment is likely to have received an impetus from improved premium yields, partly offset by a decline in Medicaid membership. The Zacks Consensus Estimate for the Health Benefits segment’s operating income is pegged at $2.2 billion, implying a fall of 2.5% from the prior-year quarter’s number. We expect it to tumble 13.9% year over year. 

Furthermore, the Carelon segment’s results are likely to reap the benefits of expanded customer relationships and acquisitions. The Zacks Consensus Estimate for operating income of the unit is $956 million, implying 17.6% growth year over year. We expect it improve 20.5% year over year. 

However, its expenses are likely to have remained elevated in the first quarter due to substantial investments in digital capabilities and platforms. In addition to this, elevated benefit expenses and cost of products sold may have affected profit margins. The Zacks Consensus Estimate for the benefit expense ratio indicates a deterioration of 100 basis points year over year. We expect total expenses to escalate 7.1% year over year in the first quarter.

Other Stocks to Consider

Here are some other companies from the Medical space, which according to our model, have the right combination of elements to beat on earnings this time around:

Masimo Corporation MASI has an Earnings ESP of +0.64% and a Zacks Rank of 1 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for MASI’s first-quarter earnings is pegged at $1.24 per share, which indicates a 61% surge from the prior-year quarter’s figure.  Masimo’s earnings beat estimates in each of the trailing four quarters, the average surprise being 14.41%. 

Hims & Hers Health, Inc. HIMS currently has an Earnings ESP of +115.69% and a Zacks Rank of 2. The Zacks Consensus Estimate for HIMS’ first-quarter earnings is pegged at 14 cents per share, which indicates a nearly three-fold increase from the year-ago quarter’s figure.  

Hims & Hers’ earnings beat estimates in two of the trailing four quarters, matched the mark once and missed the same in the remaining one occasion, the average surprise being 40.42%.

Centene Corporation CNC has an Earnings ESP of +1.85% and a Zacks Rank of 3 at present. The Zacks Consensus Estimate for CNC’s first-quarter earnings is pegged at $2.36 per share, which implies a 4.4% rise from the year-ago quarter’s figure.  

Centene’s earnings beat estimates in three of the trailing four quarters and missed the mark once, the average surprise being 21.78%.

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This article originally published on Zacks Investment Research (zacks.com).

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