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On Wednesday, Cantor Fitzgerald analyst Sarah James reaffirmed an Overweight rating on Elevance Health Inc. (NYSE:ELV) with a price target of $485.00. Currently trading at $382.48, the stock appears undervalued according to InvestingPro analysis, with 9 analysts recently revising their earnings expectations upward. James provided an analysis of the company’s financial performance and its potential exposure to changes in Medicaid policies. Elevance Health reported earnings per share (EPS) of $0.17 with revenues totaling $15.5 billion. Additionally, the company has an EPS of $0.80 from operations involving approximately $34.3 billion in revenues that are exposed to Medicaid expansion lives.
James noted that Elevance Health operates in 26 states, 18 of which have expanded Medicaid. With a robust market cap of $88.52B and a P/E ratio of 14.77, the company maintains a strong financial position, earning a "GOOD" overall health score from InvestingPro. This expansion represents approximately 2,055,000 individuals or 23% of Elevance’s Medicaid book. However, there are concerns related to states with trigger laws, specifically Indiana, Iowa, North Carolina, and Virginia. These laws could potentially roll back Medicaid expansion if federal funding drops below 90%. In these states, Elevance Health is estimated to cover 439,000 lives, which equates to 5% of its Medicaid book.
The analyst’s commentary highlighted the significance of Medicaid expansion to Elevance Health’s business model. In states with expanded Medicaid, the company has a considerable number of covered lives, which contributes to its revenue stream. The potential risk posed by trigger laws in certain states could affect the company’s financial stability, as a reduction in Medicaid funding might lead to a rollback of expansion benefits.
Elevance Health’s stock performance will continue to be influenced by both its earnings reports and the evolving landscape of Medicaid policy in the United States. With a substantial portion of its revenue tied to Medicaid expansion lives, changes in legislation and funding could impact the company’s future earnings and financial health.
Investors in Elevance Health will likely monitor the situation closely, as any developments regarding Medicaid funding and trigger laws could have direct implications for the company’s stock valuation and financial performance. For a comprehensive analysis of Elevance Health’s risk factors and growth potential, InvestingPro subscribers can access detailed financial health metrics, 12 additional ProTips, and an exclusive Pro Research Report that transforms complex Wall Street data into actionable intelligence.
In other recent news, Elevance Health Inc. reported third-quarter 2024 earnings with adjusted diluted earnings per share (EPS) of $8.37, which fell short of analyst expectations of $3.98. Despite this, the company’s revenue slightly exceeded forecasts, reaching $45 billion, up 5% year-over-year. Bernstein analysts have shown confidence in Elevance by raising the stock’s price target from $502 to $511, maintaining an Outperform rating. Conversely, JPMorgan adjusted its financial outlook for Elevance, reducing the price target from $548 to $479, while still maintaining an Overweight rating. This revision followed Elevance’s mixed fourth-quarter earnings report, highlighting a softer outlook for its Health Benefits segment but positive growth in its Carelon operations. Cantor Fitzgerald maintained an Underweight rating with a price target of $485, emphasizing the importance of Medicare Advantage enrollment data. The Medicaid segment faces challenges, but JPMorgan anticipates state rate updates will improve margins, while Bernstein expects long-term growth to justify a higher valuation. These developments reflect a varied outlook on Elevance Health’s financial performance and strategic positioning.
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