Strategic Expansions and Investments Drive Growth and Diversify Revenue Streams

What are the underlying business or industry changes driving this perspective?

• Expansion of Carelon's capabilities, particularly in high-growth areas like infusible and injectable therapies through the acquisition of Paragon Healthcare, is expected to enhance service offerings for consumers with complex and chronic needs. This strategic move is aimed at driving revenue growth and diversifying income streams by catering to a broader client base.
• Continuation of strategic enhancements and investments in the commercial health benefits business, including the integration of AI and advanced technologies to improve customer experience and operational efficiencies. These initiatives are projected to strengthen first call resolution and claims auto-adjudication rates, potentially leading to enhanced net margins through operational efficiencies. (Impact: Net margin improvement)
• Focused growth in the Medicaid and individual health benefits segments, driven by targeted initiatives to maximize access to care for redetermined Medicaid beneficiaries and the anticipated increase in membership. This strategic direction is expected to result in substantial membership growth, thereby positively influencing revenue. (Impact: Revenue growth)
• Investments in Medicare Advantage by building a strong foundation for sustainable long-term growth, which includes improving star quality ratings and driving profitable growth. Although the Medicare Advantage market faces challenges, the company's approach to addressing product sustainability and cost management is poised to strengthen earnings. (Impact: Earnings improvement)
• Implementing an extensive renewal campaign and partnership program to increase equitable access to digital and virtual health tools for Medicaid members. This not only serves to enhance the company's service offering but is also expected to foster member loyalty and potentially drive membership growth. (Impact: Revenue growth, member retention)

Figures in the charts may differ slightly from those mentioned in the narrative

How have these above catalysts been quantified?

• Analysts are assuming Elevance Health's revenue will grow by 4.6% annually over the next 3 years.
• Analysts assume that profit margins will increase from 3.5% today to 5.1% in 3 years time.
• Analysts expect EPS to reach $44.54 ($10.0 billion in earnings) by about February 2027, up from $25.73 today.

Figures in the charts may differ slightly from those mentioned in the narrative

What could happen that would invalidate this narrative?

• Intense competition, particularly in the Medicare Advantage sector, could constrain membership growth and margin expansion, impacting the company's overall profitability.
• Risk associated with integrating acquisitions, such as Paragon Healthcare, may divert resources and impact operating efficiency, potentially affecting financial performance.
• Rapid policy changes and regulatory uncertainty, especially related to Medicaid eligibility redeterminations, could lead to significant membership attrition, affecting revenue streams.
• Dependence on technological advancements for service delivery and internal processes, like AI and natural language processing, poses operational risks if these technologies fail to deliver anticipated efficiencies or encounter security vulnerabilities, impacting net margins.
• Fluctuations in medical cost trends, especially amidst pandemic recovery and adjustments in Medicare risk models, could lead to unexpected increases in benefit expenses, adversely affecting the company-s earnings.