Elevance Health (ELV), formerly known as Anthem, is everywhere; its network includes 350,000 primary-care physicians, 486,000 behavioral-health providers, 700,000 specialists, and 97% of hospitals in the U.S., notes Rich Moroney, editor of Dow Theory Forecasts.

With 47.5 million members, Elevance has become the largest U.S. managed-care provider. But don’t make the mistake of assuming that growth opportunities are limited.

The firm has grown to its current size in part via licensing agreements with Blue Cross Blue Shield. At the end of 2022, Elevance served about 33 million Blue Cross Blue Shield members while Blue plans nationwide combined for more than 110 million members. Over the next decade, many more of those members should end up on Elevance’s rolls.

Regarding market growth, we can provide some context:

* In 2018, Elevance operated Blue networks in nine states, with full saturation in two.

* In 2023, Elevance operates in 14 states, of which seven feature a company presence in every county.

* Despite the company’s huge share gains, it currently manages less than one-third of total Blue membership, leaving plenty of room for expansion.

The firm's Medicare Advantage membership reached 2 million in 2022, twice the membership in 2018. During those four years, marketwide insurance penetration has increased, with 47% of the roughly 60 million eligible Americans opting for coverage, up from 36% in 2018.

While the Medicare Advantage market continues to expand, Elevance’s business is growing much more quickly. Expect continued share gains in this segment.

The federal government recently announced a lower-than-expected average cut of 1.1% in 2024 reimbursement rates, as well as estimating that total payments will rise an average of 3.3% for the year, versus an initial estimate of 1%.

In addition to scale, Elevance also invests in quality. The Centers for Medicare and Medicaid Services ranks Medicare insurance plans from one star to five stars. This year, 64% of Elevance members are enrolled in plans ranked four stars or better, up from 47% in 2018.

Elevance also operates a services business, Carelon, which provides benefits management, mental-health care, and medical-operations assistance. Carelon generated $41 billion in revenue last year, about one-fourth of Elevance’s total revenue. Carelon expects annual revenue growth in the low-double-digits through 2027, while the larger medical-benefits business projects upper-single-digit growth.

Elevance Healthgrew March-quarter earnings per share 16% to $9.46 excluding special items, to exceed the consensus by $0.17. Total revenue climbed 11% to $42.2 billion. Cash provided by operations more than doubled to $6.5 billion. Medical membership rose 3% to 48.1 million people, driven by 9% growth for Medicaid and 7% growth for Medicare Advantage.

The company now expects 2023 earnings per share to exceed $32.70, up $0.10 from its prior outlook but below the then-consensus of $32.79. That implies minimum growth of 12.5%, in line with management’s long-term target of 12% to 15%. Elevance remains a Focus List buy.

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