Elevance Health Q2 Earnings Miss Estimates on Rising Medical Costs

Elevance Health, Inc. ELV has reported second-quarter 2025 adjusted earnings per share (EPS) of $8.84, which missed the Zacks Consensus Estimate by 3.5%. The bottom line decreased 12.6% year over year.Operating revenues of $49.4 billion rose 14.3% year over year. Moreover, the top line beat the consensus mark by 2.6%.Quarterly revenues benefited from rising premiums and product revenues. However, the upside was offset by rising medical cost trends in the ACA and Medicaid business.Elevance Health, Inc. Price, Consensus and EPS Surprise  Elevance Health, Inc. price-consensus-eps-surprise-chart | Elevance Health, Inc. QuoteELV’s Q2 Operational UpdateMedical membership of Elevance Health was around 45.6 million as of March 31, 2025, which slipped 0.3% year over year. The decrease was due to attrition in its Medicaid business, partially offset by growth in Medicare Advantage and Individual ACA membership. The reported figure missed the Zacks Consensus Estimate and our estimate of 45.8 million. Medical membership slipped 0.5% quarter over quarter due to attrition from lower effectuation rates in ACA and declining Medicaid membership.Premiums increased 16.5% year over year to $41.3 billion and also came in higher than the consensus mark of $39.6 billion. Product revenues of $6 billion increased 9.3% year over year but came in lower than the Zacks Consensus Estimate and our estimate of $6.1 billion.Net investment income fell 4.3% year over year to $486 million but beat the consensus mark of $464.7 million. The adjusted operating margin deteriorated 170 basis points (bps) year over year to 5%.Total expenses of $47.5 billion rose 16.1% year over year and were higher than our estimate of $45.3 billion. The year-over-year rise was due to higher benefit expenses, the cost of products sold and interest expenses.The operating expense ratio improved 160 bps year over year to 10.1%. The benefit expense ratio of 88.9% deteriorated 260 bps year over year. (See the Zacks Earnings Calendar to stay ahead of market-making news.)Q2 Segmental Results of ELVHealth BenefitsOperating revenues totaled $41.6 billion, which increased 11.9% year over year and also beat the Zacks Consensus Estimate of $40.8 billion. The segment benefited from increased premium yields, rising Medicare Advantage membership and recent acquisitions.Operating gains declined 27.3% year over year to $1.6 billion, lower than the consensus mark of $1.9 billion. The operating margin of 3.8% deteriorated 200 bps year over year.CarelonThe segment’s operating revenues amounted to $18.1 billion, which rose 36.1% year over year. The uptick was driven by the recent buyouts in home health and pharmacy services, higher CarelonRx product revenues and the scaling of innovative risk-based capabilities in Carelon Services. The reported figure surpassed the Zacks Consensus Estimate of $16.9 billion and our estimate of $16.7 billion.The unit’s operating gain of $936 million increased 28.6% year over year and beat the consensus mark of $803 million. The adjusted operating margin deteriorated 40 bps year over year to 5.2%.Corporate & OtherOperating revenues amounted to $232 million in the second quarter. The unit incurred an operating loss of $71 million, narrower than the prior-year quarter’s loss of $85 million.ELV’s Financial Details (As of June 30, 2025)Elevance Health exited the second quarter with cash and cash equivalents of $8.6 billion, which rose from the 2024-end level of $8.3 billion. Total assets of $121.9 billion increased from the $116.9 billion figure at 2024-end.Long-term debt, less the current portion, amounted to $28.2 billion, down from the $29.2 billion figure as of Dec. 31, 2024. Short-term borrowings at the second-quarter end were $360 million, while the current portion of the long-term debt amounted to $1.6 billion.Total equity of $43.9 billion grew from the 2024-end level of $41.4 billion.Elevance Health generated net cash flow from operations of $3.1 billion in the first half of 2025, an increase of 26.6% year over year.ELV: Capital Deployment UpdateElevance Health bought back shares worth $379 million in the second quarter. It had a leftover capacity of around $8 billion under its share buyback authorization as of June 30, 2025.Elevance Health paid a quarterly dividend of $1.71 per share, adding up to a cash distribution worth $385 million.ELV’s 2025 OutlookThe company now expects adjusted EPS to be $30, lower than the previously forecasted range between $34.15 and $34.85, and down from the 2024 reported figure of $33.04.The operating margin for the Health Benefits segment was earlier estimated to witness a decrease of 50-25 basis points (bps) from the 2024 reported figure of 4.2%. Also, the operating margin for CarelonRx was expected to see 0-20 bps growth, while the same for Carelon Services was estimated to witness a decrease of 100-50 bps.Management earlier expected operating revenues to witness high-single- to low-double-digit growth in 2025 from $175.2 billion in 2024. Premium revenues were earlier estimated to witness low-double-digit growth in 2025 from the 2024 level of $144.2 billion. Medical enrollment was forecasted to be between 45.8 and 46.7 million in 2025, up from 45.7 million in 2024.Net investment income was earlier anticipated to be $1.9 billion, down from $2.1 billion in 2024. Interest expenses were forecasted to be $1.5 billion in 2025, while operating cash flow was likely to be approximately $8 billion. Diluted shares were earlier estimated to decline to 225-226 million from 232.9 million at 2024-end.ELV’s Zacks Rank & Key PicksELV currently carries a Zacks Rank #3 (Hold).Some better-ranked stocks in the Medical space are Envista Holdings Corp NVST, Fresenius Medical Care AG & Co. FMS and Phibro Animal Health Corp PAHC, each sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.The Zacks Consensus Estimate for Envista’s current-year earnings of $1.04 per share has witnessed two upward revisions in the past 60 days against no movement in the opposite direction. Envista beat earnings estimates in three of the trailing four quarters and missed once. The consensus estimate for current-year revenues is pegged at $2.6 billion, suggesting 1.7% year-over-year growth.The Zacks Consensus Estimate for Fresenius Medical Care’s current-year earnings of $2.21 per share has witnessed four upward revisions in the past 60 days against no movement in the opposite direction. Fresenius Medical Care beat earnings estimates in three of the trailing four quarters and met once, with the average surprise being 6.6%. The consensus estimate for current-year revenues is pegged at $21.9 billion, suggesting 4.8% year-over-year growth.The Zacks Consensus Estimate for Phibro Animal Health’s current-year earnings of $2.04 per share has witnessed one upward revision in the past 60 days against no movement in the opposite direction. Phibro Animal Health beat earnings estimates in each of the trailing four quarters, with an average surprise being 30.6%. The consensus estimate for current-year revenues is pegged at $1.3 billion, suggesting 25.7% year-over-year growth.Zacks' Research Chief Picks Stock Most Likely to "At Least Double"Our experts have revealed their Top 5 recommendations with money-doubling potential – and Director of Research Sheraz Mian believes one is superior to the others. Of course, all our picks aren’t winners but this one could far surpass earlier recommendations like Hims & Hers Health, which shot up +209%.See Our Top Stock to Double (Plus 4 Runners Up) >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Fresenius Medical Care AG & Co. KGaA (FMS): Free Stock Analysis Report Phibro Animal Health Corporation (PAHC): Free Stock Analysis Report Envista Holdings Corporation (NVST): Free Stock Analysis Report Elevance Health, Inc. (ELV): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks