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On Wednesday, Guggenheim initiated coverage on shares of Elevance Health Inc. (NYSE:ELV), formerly known as Anthem Inc., with a Buy rating and a price target of $518.00. Currently trading at $430.90, InvestingPro analysis suggests the stock is undervalued, with the company maintaining a "GREAT" overall financial health score of 3.15 out of 5. The firm believes that Elevance's strategic use of the Blue Cross Blue Shield (BCBS) brand, its effective diversification across all end-markets, and its strong presence in both the commercial and Medicaid sectors, along with the growth of its services organization, Carelon, place the company in a strong and defensible position. This positioning is expected to help Elevance mitigate potential headwinds and drive favorable earnings growth.
The analyst from Guggenheim acknowledged the near-term margin pressures Elevance faces, including Medicaid rate and acuity mix pressures, a shift in government mix, and the impacts of acquisitions. Supporting this optimistic outlook, InvestingPro data shows that 9 analysts have recently revised their earnings estimates upward for the upcoming period, with the stock maintaining relatively low price volatility despite market challenges. Despite these headwinds, the analyst maintains that Elevance's longer-term growth profile remains solid.
The report also highlighted Elevance's ability to leverage selling, general, and administrative (SG&A) efficiencies to offset some of the current fiscal pressures. The firm views the healthcare company's headwinds as temporary and believes that Elevance's broad market reach and growth in its services sector provide a strong foundation for future performance.
Looking ahead, Guggenheim anticipates that Elevance's capital deployment strategies and the potential for further expansion in Medicare Advantage and services will contribute to the upside potential. This could lead to surpassing the company's long-term earnings per share (EPS) growth target of over $12. The firm's initiation of coverage with a Buy rating reflects confidence in Elevance's business strategy, growth prospects, and what is considered an attractive valuation at the current levels. Adding to the investment case, InvestingPro data reveals that Elevance has raised its dividend for 14 consecutive years, with an impressive dividend growth of 15.54% over the last twelve months. For deeper insights into Elevance's valuation and growth metrics, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.
In other recent news, Elevance Health has reaffirmed its earnings guidance for the full year 2025, projecting earnings between $30.40 and $31.10 per diluted share, with adjusted earnings expected to be between $34.15 and $34.85 per diluted share. Cantor Fitzgerald has maintained an Overweight rating on Elevance Health, setting a price target of $485, while Bernstein analysts at SocGen Group have increased their price target to $585, citing optimism in earnings per share growth. Additionally, Elevance Health expects its total medical enrollment by the end of 2025 to align with previous forecasts, including Medicare Advantage membership projections.
The Centers for Medicare and Medicaid Services announced a significant 5.06% increase in Medicare insurer payment rates for 2026, surpassing earlier proposals and expected to generate over $25 billion in additional revenue for the industry. However, the healthcare sector is facing scrutiny as the Department of Justice has launched an investigation into UnitedHealth Group (NYSE:UNH)'s Medicare billing practices, raising concerns about potential implications for other companies, including Elevance Health. This investigation has led to a decline in stock prices for major healthcare companies, reflecting investor caution.
Despite these developments, analysts from Bernstein have expressed optimism about Elevance Health's future, anticipating a recovery in government-managed care margins and a normalization of healthcare service utilization. Investors will continue to monitor these factors closely, as they play a crucial role in shaping the financial landscape for Elevance Health and other companies in the sector.
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