Elevance raises EPS forecast to $29.00 after earnings beat estimates
Key Facts
Elevance Health raised its adjusted earnings per share forecast for fiscal 2026 to at least $29.00 in its third-quarter earnings announcement on October 21, supported by improved medical costs and growth in Carelon's earnings. According to Reuters, the company had previously forecast adjusted earnings of at least $27 per share for the same year, before announcing the financial update accompanying its quarterly results. Third-quarter adjusted earnings per share were $6.99, exceeding analysts' expectations of $4.68, according to the agency. The company reported operating revenue of $50.4 billion for the same quarter in its earnings statement. The announcement thus combined a higher annual outlook and a quarterly earnings beat with an improvement in the medical expense ratio reported in the company's results.
The medical benefit expense ratio was 90.6% in the third quarter of fiscal 2026, according to Elevance's statement, which showed a decline from the same period a year earlier. The company said the ratio improved by 70 basis points year on year as part of its operating results for the period. It attributed the improvement to the performance of Medicare Advantage plans, one of the businesses it cited in explaining the change in medical expenses. It also attributed part of the improvement to individual insurance under the Affordable Care Act, alongside the performance of Medicare Advantage plans during the quarter. Improved medical cost management was among the factors accompanying the increase in the annual earnings forecast, according to Reuters' coverage of the earnings announcement and the company's financial outlook update.
In its Carelon business, Elevance reported operating revenue of $19.3 billion in the third quarter of fiscal 2026 as part of the group's quarterly results. The business's operating earnings grew 17% from the same period a year earlier, according to the company's official statement. Elevance attributed the earnings growth to service solutions, which it listed among the operating drivers of Carelon's performance during the period. It added that improved specialty pharmacy profitability also contributed to the business's operating earnings growth in the third quarter. The performance of services and specialty pharmacy represented another aspect of the group's results, alongside the improvement it reported in its medical insurance business, as it updated its outlook for the current fiscal year.
The quarterly results included a net non-operating benefit of $1.85 per share, according to Elevance, among the items announced with its third-quarter results. For fiscal 2026, the company also raised its GAAP earnings per share forecast to at least $22.00. On cash flow, the group reported operating cash flow of $1.3 billion in the third quarter, alongside its quarterly revenue and earnings figures. It raised its full-year operating cash flow forecast to at least $6.5 billion, according to the earnings statement. The annual outlook update thus covered GAAP earnings per share and operating cash flow, as well as adjusted earnings, with the non-operating benefit included in the details reported for the period.
To calculate earnings growth next year, Elevance set a fiscal 2026 earnings per share baseline of at least $26.75, according to its official statement. This baseline excludes non-recurring net investment income, which the company described in its statement as "non-recurring net investment income." It also excludes non-operating items as part of the adjustments the company adopted to establish the starting point used to calculate next year's targeted growth. It further excludes targeted one-time investments, according to the company's definition of the earnings baseline against which it will measure growth in adjusted diluted earnings per share. Elevance thus ties its next target to an earnings base adjusted for these items, while its announced annual forecast concerns adjusted earnings per share for the current fiscal year.
In the market, Elevance shares rose about 2% in premarket trading on October 21, 2026, according to Reuters' coverage of the earnings announcement. The shares then reversed course to fall 1.3% during morning trading that day, after gains before the session began. The reversal followed the announcement of a higher annual outlook and quarterly earnings per share that exceeded analysts' estimates, according to the agency. On the management front, Jeff Park was appointed president of Carelon effective December 1, 2026, in a leadership change at the business that reported operating earnings growth. For fiscal 2027, Elevance targets growth of at least 12% in adjusted diluted earnings per share, calculated from the earnings baseline specified in its statement.