Why did EPS grow faster than revenue in the first quarter of 2024?

EPS rose 15.5% while revenue grew 0.9%, mainly because premium rate increases improved margins, the benefit expense ratio fell 20 basis points, and amortization of other intangible assets dropped sharply to $116 million from $235 million. Lower share count (diluted shares down 2.3%) from buybacks also contributed.

How much of the earnings growth came from one-time or non-operating items?

Adjusted EPS of $10.64 excludes net losses on financial instruments ($0.69 per share), amortization of intangibles ($0.50), and transaction and integration costs ($0.22), among other items. Adjusted EPS growth of 12.5% is therefore a cleaner gauge of underlying performance than the 15.5% reported growth, though both metrics improved.

What is the outlook for Medicaid membership and revenue?

Medicaid membership fell 21.5% year over year to 9.3 million, driven by eligibility redeterminations and expected footprint adjustments. Management expects these headwinds to continue weighing on revenue, though the company did not provide a detailed membership forecast in this release.

Is the company's cash generation and capital return sustainable?

Operating cash flow of $2.0 billion covered $566 million of buybacks and $379 million of dividends, but cash conversion of 0.9x net income and a $1.6 billion increase in short-term borrowings bear watching. Parent company cash of about $1.0 billion and roughly $3.6 billion of remaining repurchase authorization provide some flexibility.

What is the strategic partnership announced with Clayton, Dubilier & Rice?

The release describes the partnership as a step toward expanding access to value-based care in local markets, with the aim of accelerating care delivery innovation and physician enablement. The release provides no financial terms, so the near-term earnings impact is not quantified.

ELV 8-K: Earnings & Results

01—Abstract

Summary

Summary of the 8-K filed April 18, 2024. Cited figures are marked; the original filing is the authoritative source.

Elevance Health (ELV) reported first quarter 2024 results on April 18, 2024, with operating revenue of $42.3 billion^a, up 0.9% year over year, and diluted EPS of $9.59, up 15.5%.

Adjusted diluted EPS was $10.64^b, up 12.5%. Operating gain rose 6.5% to $3.0 billion and total operating margin expanded 30 basis points to 7.1%, driven primarily by premium rate adjustments to offset medical cost trend in Health Benefits and improved risk-based performance in Carelon Services. The benefit expense ratio improved 20 basis points to 85.6%, while the operating expense ratio rose 10 basis points to 11.6% (unchanged at 11.4% excluding adjustment items).

Top-line growth was muted by Medicaid membership attrition, which fell 21.5% year over year to 9.3 million members as eligibility redeterminations and footprint adjustments reduced enrollment. Total medical membership declined 3.9% to 46.2 million, partly offset by growth in Individual (+32.3%), Employer Group fee-based, and BlueCard. Days in claims payable rose to 49.0, up 3.0 days year over year, which warrants monitoring alongside the reserve position, as prior-year reserve redundancies contributed $1.2 billion^c to the quarter's results.

Management raised full-year 2024 guidance to diluted EPS greater than $34.05^d and adjusted diluted EPS greater than $37.20. Capital deployment was active: the company repurchased $566 million of stock and paid $379 million in dividends, leaving about $3.6 billion of authorization. Operating cash flow was $2.0 billion, or 0.9 times net income, below the prior-year period.

Management also announced a strategic partnership with Clayton, Dubilier & Rice to advance primary care and physician enablement. Total debt rose on a short-term basis, with $1.6 billion in short-term borrowings and $2.9 billion in current long-term debt.

02—Key points

Key Highlights

Diluted EPS of $9.59 rose 15.5% year over year; adjusted diluted EPS of $10.64 rose 12.5%.
Full-year 2024 guidance raised to diluted EPS greater than $34.05 and adjusted diluted EPS greater than $37.20.
Operating revenue of $42.3 billion grew only 0.9%, held back by Medicaid membership losses of 21.5% year over year.
Operating margin expanded to 7.1% (up 30 bp), with Health Benefits margin at 6.1% and Carelon margin at 6.7%.
Benefit expense ratio improved 20 bp to 85.6%, supported by premium rate increases that offset medical cost trend.
Days in claims payable rose to 49.0, up 3.0 days year over year, and prior-year reserve redundancies contributed $1.2 billion.
Operating cash flow of $2.0 billion (0.9x net income) was well below $6.5 billion in the prior-year quarter, and short-term borrowings rose to $1.6 billion.

03—Questions

Frequently Asked Questions

Why did EPS grow faster than revenue in the first quarter of 2024?
EPS rose 15.5% while revenue grew 0.9%, mainly because premium rate increases improved margins, the benefit expense ratio fell 20 basis points, and amortization of other intangible assets dropped sharply to $116 million from $235 million. Lower share count (diluted shares down 2.3%) from buybacks also contributed.
How much of the earnings growth came from one-time or non-operating items?
Adjusted EPS of $10.64 excludes net losses on financial instruments ($0.69 per share), amortization of intangibles ($0.50), and transaction and integration costs ($0.22), among other items. Adjusted EPS growth of 12.5% is therefore a cleaner gauge of underlying performance than the 15.5% reported growth, though both metrics improved.
What is the outlook for Medicaid membership and revenue?
Medicaid membership fell 21.5% year over year to 9.3 million, driven by eligibility redeterminations and expected footprint adjustments. Management expects these headwinds to continue weighing on revenue, though the company did not provide a detailed membership forecast in this release.
Is the company's cash generation and capital return sustainable?
Operating cash flow of $2.0 billion covered $566 million of buybacks and $379 million of dividends, but cash conversion of 0.9x net income and a $1.6 billion increase in short-term borrowings bear watching. Parent company cash of about $1.0 billion and roughly $3.6 billion of remaining repurchase authorization provide some flexibility.
What is the strategic partnership announced with Clayton, Dubilier & Rice?
The release describes the partnership as a step toward expanding access to value-based care in local markets, with the aim of accelerating care delivery innovation and physician enablement. The release provides no financial terms, so the near-term earnings impact is not quantified.

04—Continue

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