Elevance Health (ELV) saw its stock decline sharply following the company's announcement of reduced 2026 financial guidance, citing higher-than-expected medical costs and regulatory pressures. The move has triggered investor concern and prompted downward revisions across the healthcare insurance sector.
- Elevance Health (ELV) lowered 2026 adjusted EPS guidance to $12.40–$12.80, down from $13.00–$13.40
- Medical loss ratio forecast increased to 84.0%–85.0%, up from 82.5%–83.5%
- Q4 medical costs rose 7.3% YoY, driven by acute care and pharmacy expenses
- Operating margin projected at 7.8%–8.2%, down from 8.5%–9.0%
- ELV stock dropped 6.4% in after-hours trading
- Sector-wide impact observed, with UNH and Aetna also experiencing declines
Elevance Health (ELV) reported a significant drop in its stock price after issuing revised guidance for fiscal year 2026, lowering its adjusted earnings per share outlook to a range of $12.40 to $12.80, down from the previous estimate of $13.00 to $13.40. The company also reduced its expected medical loss ratio to 84.0% to 85.0%, up from the prior projection of 82.5% to 83.5%. These adjustments reflect rising healthcare claims, particularly in its Medicaid and Medicare Advantage lines, alongside increased state-level regulatory costs. The guidance downgrade comes amid broader challenges in the managed care space, including inflationary pressures on provider payments and higher utilization rates among enrollees. The revised outlook marks a notable shift from Elevance's Q3 earnings report, where management had expressed confidence in cost controls. The updated forecast indicates that these measures are proving insufficient against accelerating claims growth, particularly in the company’s high-risk, government-sponsored programs. Elevance cited a 7.3% year-over-year increase in medical costs during the fourth quarter, driven by acute care utilization and rising pharmacy expenses. As a result, the company now expects its 2026 operating margin to contract to 7.8% to 8.2%, down from the prior 8.5% to 9.0% range. Market reaction was swift, with ELV shares falling nearly 6.4% in after-hours trading. The decline has rippled across the healthcare insurance sector, with UnitedHealth Group (UNH) and Aetna (a CVS Health subsidiary) also seeing modest sell-offs. Analysts have begun downgrading Elevance's stock, with several citing concerns over the sustainability of its pricing strategy and the potential for further guidance revisions. The broader implications could affect capital allocation decisions by institutional investors focused on healthcare equities and may influence upcoming Medicare contract bidding dynamics.