Elevance Health on Wednesday lifted full-year guidance and produced a third-quarter earnings beat that topped estimates as investors continue to watch how the insurer navigates costs in its Medicare Advantage and Medicaid portfolios.
For the company's third quarter, adjusted earnings per share came to $6.99, above consensus estimates of $4.71, according to FactSet. The earnings per share figure reflected about $1.85 worth of net nonoperating benefit, and about $0.50 in operating outperformance, the company said.
Total operating revenue reached $50.44 billion, up 0.7% from the same period a year before, and above analysts' forecasts of $49.22 billion.
An important metric on medical spending also came down, which investors like to see. Elevance's medical cost ratio -- spending on medical care as a percentage of premium revenue -- was 90.6%, lower than 91.3% a year ago, and below a consensus estimate of 91.1%
The lower expense ratio was "driven by better performance in Medicare Advantage," along with the company's individual Affordable Care Act portfolio, Elevance said.
Elevance raised its 2026 outlook to at least $29 in adjusted earnings per share, up from prior guidance of at least $27. The company also raised its earnings baseline to at least $26.75, up $0.75. Executives forecast at least 12% earnings growth for 2027 from the baseline, which excludes certain nonrecurring and nonoperating items.
"We've got a clear path to sustainable earnings growth over time through medical cost management and pricing," Elevance Chief Financial Officer Mark Kaye told Barron's.
Elevance operates across insurance markets that include the commercial space, Medicare health coverage for seniors, and the joint federal-state Medicaid program for lower-income beneficiaries.
Another segment of the company -- Carelon -- provides pharmacy benefits and healthcare services. Carelon saw operating revenue grow $1 billion, or 5% year-over-year, to $19.3 billion in the third quarter.
Like other large healthcare companies, Elevance has reshaped its Medicare Advantage portfolio to improve performance, after years of rising medical costs created turbulence for insurers.
Through the third quarter, Elevance's Medicare Advantage membership has shrunk 15.5% compared with the same period a year ago. The company has said it's targeting an operating margin of at least 2% this year in that business line.
Kaye said improvements in Medicare Advantage are "really coming from the deliberate product and geographic actions we took for 2026," and supported by disciplined medical cost management.
The insurer's Medicaid business is also a focal point for Wall Street. Elevance has said that 2026 would be a trough year for Medicaid margins, with a full-year operating margin outlook of -1.75%.
Kaye said the company is now seeing "slight improvement in Medicaid operating margin" relative to its expectations.
In recent months, the company confirmed plans to exit the Washington, D.C., Medicaid market, and to end its participation in a joint venture in the Louisiana market. During the second-quarter earnings call, CEO Gail Boudreaux said the company would leave markets over the following year to 18 months where it doesn't see a path to sustainable performance.
Elevance shares have gained 25.6% year to date through Tuesday, when the stock closed at $440.18, versus 12.7% for the broader market.