Elevance Health's stock plummeted by more than 9% in premarket trading following a mixed earnings report. The company reported an adjusted earnings per share (EPS) of $7.45 for Q2, surpassing the consensus estimate of $6.21 by $1.24. Revenue hit $49.8 billion, exceeding the forecast of $48.63 billion and reflecting a year-over-year increase of 0.8%.
However, investors were spooked by a significant decline in operating margins, which fell to 3.5% from 4.9% a year earlier. The adjusted operating margin also slipped to 3.6%, down from 5.0%. The Health Benefits segment's operating margin dropped sharply to 2.1%, compared to 3.8% in the previous year. This decline was attributed to rising medical costs associated with government programs, although improved performance in Individual ACA helped mitigate some losses.
In response to these results, Elevance raised its full-year adjusted EPS guidance to at least $27.00, slightly above the analyst consensus of $26.91. This marks the second upward revision in a few months, with adjustments also made in April and June. CEO Gail Boudreaux highlighted that results were bolstered by disciplined execution and improved performance across the company's diverse portfolio.
Medical membership numbers revealed a concerning trend, falling by approximately 469,000 to around 44.9 million as of June 30. This decrease was linked to a transition in commercial fee-based customers and anticipated losses in Individual ACA and Medicaid memberships. Despite these challenges, the Health Benefits segment generated $42.7 billion in revenue, a 3% increase from the previous year.
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