Why Elevance Health (ELV) Shares Are Falling

Elevance Health Inc (NYSE:ELV) shares edged lower by 3.8% to $489.66 on Tuesday following competitor UnitedHealth Group’s third-quarter earnings report.

What Happened: UnitedHealth reported an adjusted EPS of $7.15, beating the consensus estimate of $7.00, with quarterly revenue surging 9.1% year-over-year to $100.8 billion. Despite this strong performance, UnitedHealth's stock dropped, likely due to the company lowering the upper end of its full-year EPS guidance from $16.40 to $15.75.

The earnings report meanwhile highlighted several areas where Elevance could face intensifying competition, which may have contributed to the downward pressure on its own stock.

Elevance, formerly known as Anthem, is one of the largest health insurers in the U.S., and its stock is sensitive to competitive dynamics within the sector.

UnitedHealth’s UnitedHealthcare division, which generated $74.9 billion in revenue during the quarter—up from $69.9 billion a year ago—continues to gain market share in both employer-sponsored and individual insurance markets.

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Elevance, which also operates major health plans through its affiliated Blue Cross Blue Shield network, could face difficulties retaining and growing its own membership base as UnitedHealth continues to attract more insured customers.

UnitedHealth added 2.4 million new members domestically in its commercial offerings this year, a direct challenge to Elevance's membership growth strategy.

What Else: In addition to health insurance, UnitedHealth’s Optum division, which provides healthcare services and pharmacy benefit management (PBM), reported $63.9 billion in revenue, a significant increase from $56.7 billion in the same quarter last year.

Optum's expanding reach into healthcare services, including direct care delivery and managed services, poses a threat to Elevance’s Carelon business, which similarly aims to integrate healthcare services with insurance operations.

As Optum scales, Elevance may face mounting pressure to accelerate its own service expansion, which could strain resources and profitability in the short term.

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Adding to investor concerns, UnitedHealth’s medical cost ratio (MCR) increased to 85.2% from 82.3% a year ago, reflecting rising healthcare costs. Elevance, as a major insurer, is also navigating these cost pressures.

Both companies face headwinds from higher medical utilization and reimbursement challenges, but UnitedHealth's ability to grow its membership base and manage costs may overshadow Elevance's efforts to balance its own insurance margins.

Despite UnitedHealth’s downward revision to its full-year EPS guidance to $15.50-$15.75 from $15.95-$16.40, the company maintained its adjusted EPS outlook of $27.50-$27.75.

The modest reduction in guidance, driven partly by business disruption from a cyberattack on UnitedHealth's Change Healthcare unit, did little to mitigate concerns about the competitive landscape.

Elevance's stock fell alongside UnitedHealth's, as the market weighed the broader implications of rising medical costs, regulatory risks, and competitive pressures across the healthcare and insurance sectors.

Understanding What’s Next: Both Elevance and UnitedHealth are currently involved in litigation concerning pharmacy benefit manager (PBM) practices, under investigation by the Federal Trade Commission (FTC).

UnitedHealth and Elevance, along with CVS Health, have requested FTC Chair Lina Khan’s recusal from the case, underscoring the regulatory scrutiny facing major PBM operators.

While UnitedHealth's stock drop may have been partly influenced by these ongoing legal uncertainties, Elevance could also face heightened investor anxiety regarding how these investigations might impact its own operations and financial outlook.

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How To Buy ELV Stock

By now you're likely curious about how to participate in the market for Elevance Health – be it to purchase shares, or even attempt to bet against the company.

Buying shares is typically done through a brokerage account. You can find a list of possible trading platforms here. Many will allow you to buy ‘fractional shares,' which allows you to own portions of stock without buying an entire share. For example, some stock, like Berkshire Hathaway, can cost thousands of dollars to own just one share. However, if you only want to invest a fraction of that, brokerages will allow you to do so.

In the the case of Elevance Health, which is trading at $490.28 as of publishing time, $100 would buy you 0.2 shares of stock.

If you're looking to bet against a company, the process is more complex. You'll need access to an options trading platform, or a broker who will allow you to ‘go short' a share of stock by lending you the shares to sell. The process of shorting a stock can be found at this resource. Otherwise, if your broker allows you to trade options, you can either buy a put option, or sell a call option at a strike price above where shares are currently trading – either way it allows you to profit off of the share price decline.

According to data from Benzinga Pro, ELV has a 52-week high of $567.26 and a 52-week low of $435.99.