Shares of health insurance provider Elevance Health (NYSE:EVH) fell 11.5% in the afternoon session after the company reported its second-quarter results and cut its full-year profit guidance, citing rising medical costs. The health insurer announced second-quarter adjusted earnings of $8.84 per share, which missed Wall Street’s expectation of $9.16 per share. While revenue of $49.42 billion beat forecasts, the company’s net income declined to $1.74 billion from $2.30 billion in the same quarter last year. The key concern for investors was the significant reduction in the company’s full-year 2025 profit outlook. Elevance now expects adjusted earnings per share of approximately $30.00, a substantial cut from its previous forecast of $34.15 to $34.85. Management attributed the downgrade to “elevated medical cost trends” in its Medicaid and Affordable Care Act (ACA) health plans. This was reflected in a higher benefit expense ratio—the percentage of premiums spent on medical care—which rose to 88.9%, indicating that costs are growing faster than premiums. The news also weighed on shares of other health insurers facing similar cost pressures.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Elevance Health? Access our full analysis report here, it’s free.
Elevance Health’s shares are not very volatile and have only had 5 moves greater than 5% over the last year. Moves this big are rare for Elevance Health and indicate this news significantly impacted the market’s perception of the business.
The previous big move we wrote about was 15 days ago when the stock dropped 9.9% on the news that peer, Centene pulled its full-year financial guidance, triggering a sector-wide sell-off. Centene cited that market growth was “lower than expected” and the number of people making claims was much higher than forecast. This news sparked fears among investors that the entire health insurance sector could be facing similar headwinds of rising costs and challenging market conditions. The negative sentiment quickly spread, impacting peers like Molina, UnitedHealth Group, and Elevance Health.
Elevance Health is down 16.8% since the beginning of the year, and at $304.33 per share, it is trading 45.9% below its 52-week high of $562.29 from September 2024. Investors who bought $1,000 worth of Elevance Health’s shares 5 years ago would now be looking at an investment worth $1,143.
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