Elevance Health plunges 14% after earnings miss, guidance cut
Health insurer cuts 2026 EPS outlook, posts operating loss in core business segment
Elevance Health shares tumbled 14% on Tuesday after the health insurer reported a significant fourth-quarter earnings miss and slashed its 2026 profit outlook, raising fresh concerns about rising medical costs across the industry.
The Indianapolis-based company reported adjusted earnings per share of $3.33 for the fourth quarter of 2025, missing analyst estimates by nearly 33% and falling well short of the $4.94 consensus expectation. Revenue came in at $49.3 billion, slightly below projections of $49.82 billion, according to analyst data.
More troubling for investors was the company's decision to cut its full-year 2026 guidance. Elevance now expects adjusted EPS of at least $25.50 for 2026, representing a decline of more than 15% compared to the $30.29 projected for 2025. The company forecast GAAP EPS of at least $22.30 for the coming year.
The earnings shortfall was driven by weakness in the company's core Health Benefits segment, which posted an operating loss of $200 million in the fourth quarter. The segment's benefit expense ratio deteriorated significantly, worsening by 110 basis points to reach 93.5%, indicating that medical claim costs are rising faster than premiums collected.
The stock plunged to $322.92, erasing roughly $14 billion in market capitalization and bringing shares down to their lowest levels since October. The drop marks the steepest single-day decline for the stock since early 2023, reflecting investors' concerns about the sustainability of health insurer profits amid rising healthcare utilization and medical cost inflation.
Despite the steep sell-off, some analysts see opportunity in the depressed valuation. Wolfe Research upgraded Elevance to "Outperform" with a $425 price target, suggesting that current estimates may represent a bottom for the company's earnings cycle. Wells Fargo increased its price target to $424 from $403 while maintaining an "Overweight" rating, noting that the 2026 guidance reset could set the stage for future upward revisions if medical cost trends stabilize.
The average analyst price target stands at $395.40, implying roughly 22% upside from current levels. However, sentiment remains divided, with Zacks Investment Research maintaining a "Sell" rating on the shares as of late January.
Elevance Health, formerly known as Anthem, is one of the largest health benefits providers in the United States, serving approximately 45 million members through its various insurance plans. The company has been transitioning toward a more technology-driven, value-based care model, but faces the same industry-wide pressures from rising medical costs that have weighed on competitors like UnitedHealth Group and CVS Health.
The benefit expense ratio deterioration of 110 basis points is particularly concerning for investors, as it suggests that Elevance is paying out more in medical claims relative to premium revenue. A ratio above 90% typically indicates tight margins for health insurers, and the 93.5% level leaves little room for administrative expenses and profit generation.
Looking ahead, investors will be watching for any signs that medical cost trends are stabilizing or worsening in the first half of 2026. The company's ability to successfully negotiate higher premium rates with employers and government programs while managing utilization will be critical to determining whether the current guidance represents a trough or a new normal for profitability.
Tuesday's 14% decline reflects the market's immediate concern that rising medical costs may be more persistent than previously anticipated, potentially pressuring margins across the managed care sector. With the stock now trading at roughly 13 times forward earnings, however, bulls argue that much of this risk is already priced in, setting the stage for a potential recovery if operational metrics improve.