Evolent weakness linked to elevated Medicaid MLRs at peers, says Stephens

Stephens analyst Jeff Garro notes Evolent Health (EVH) is trading down about 6% intra-day, which the firm sees being based on Elevance Health (ELV) and UnitedHealth (UNH) citing elevated Medicaid medical loss ratios, or MLRs, for Q3 and potentially into FY25 in their earnings reports and guidance. The firm believes Evolent’s exposure to this trend is about 8% of gross profits, and a headwind of similar magnitude to what Elevance described, which the firm calls “arguably an extreme case” for Evolent, would not be larger than Evolent’s Q3 EBITDA guidance range. Further, Evolent is not exposed to the behavioral spend category called out by Elevance, added the analyst, who has an Overweight rating and $38 price target on Evolent Health shares.