Elevance Raises 2026 Baseline To At Least $26.75, While $1.85 A Share Of Third-Quarter EPS Was Non-Operating
Analysts pressed Elevance on Medicaid rates and margins after it lifted 2026 guidance to at least $29 a share.
Elevance Health raised its 2026 adjusted earnings guidance to at least $29 a share on its third-quarter earnings call Wednesday, and lifted its 2026 earnings baseline to at least $26.75. CEO Gail Boudreaux said the higher base supports her confidence in at least 12% growth in 2027, but analysts spent much of the call on Medicaid.
What the quarter was made of
Chief Financial Officer Mark Kaye said third-quarter adjusted earnings of $6.99 a share included about 50 cents of operating outperformance. It also included a net non-operating benefit of $1.85 a share, mostly valuation adjustments in investment income, partly offset by certain state tax items.
Kaye said the baseline rose by 75 cents to at least $26.75, reflecting the quarter's operating outperformance and a better full-year outlook for individual ACA (the exchange plans). The 2026 guidance also reflects a non-recurring discrete tax item the company expects in the fourth quarter.
Operating revenue rose just under 1% to $50.4 billion. The benefit expense ratio was 90.6%, an improvement of 70 basis points (0.70 percentage points), while the adjusted operating expense ratio rose 90 basis points to 11.3%. Operating cash flow was $1.3 billion in the quarter, and full-year guidance for it rose to at least $6.5 billion.
Boudreaux said the baseline increase reflected "better underlying results and greater confidence and the durability of that performance." She also said the Elevate medical cost management platform has identified more than $300 million in anticipated savings this year.
The Medicaid questions
An analyst at UBS asked whether 12% growth depends on Medicaid improvement. Boudreaux answered that "we're not relying on any single business market or assumption," and moved to the next question without laying out the bridge.
An analyst at Wells Fargo noted that the improvement in Medicaid margin guidance looked smaller than the rate improvement implied last quarter. Kaye said the July 1 rate updates lifted second-half margins, but "Rates are certainly not fully caught up with the underlying costs."
Kaye called 2026 the trough for Medicaid margins and said Elevance still views 2% to 4% as the right long-term target. He said the pace of recovery depends mainly on how fast rates align with the cost of care, and that cost trend is elevated but stable. Executive Felicia Norwood, the Chief Health Benefits Officer, said states are working on 2027 rates, with some building in work-requirement assumptions.
Kaye said Elevance is planning for incremental acuity pressure from membership changes.
Other lines of business
Kaye said Medicare Advantage should deliver an operating margin of at least 2% in 2026. Norwood said the company expects to improve on that in 2027 while moving toward a long-term target range of 3% to 5%.
In individual ACA, Kaye said the company ended the quarter with about 1.3 million members and expects to finish the year with at least 1.2 million.
On commercial, Kaye said Elevance priced 2026 and 2027 for a low double-digit cost trend, and that pressure from independent dispute resolution has been more pronounced in its self-funded (ASO) business than in fully insured.
What to watch
Kaye said more detail on the 2027 path for Medicaid margins and on 2027 assumptions, including capital deployment, will come on the January earnings call. For now he described the posture on capital as intentionally disciplined, with the company remaining opportunistic on share repurchases.
Shares traded at $430.80, down about 2% from the prior close, in Wednesday trading as of 9:49 a.m. ET.
Sources
- Elevance Health beats estimates, raises guidance — Yahoo Finance
- Elevance Health (ELV) Surpasses Q3 Earnings and Revenue Estimates — Yahoo Finance
- Elevance Health Q3 earnings beat forecasts, raises 2026 EPS outlook (ELV:NYSE) — seekingalpha.com
- Elevance Raises Full-Year Guidance on Lower Medical Costs (1) — news.bloomberglaw.com
- Elevance Health Reports $1.3 Billion Profit As Insurer’s Costs Ease — Yahoo Finance
