Wall Street got off to another solid start on Wednesday morning, with major market benchmarks rising between 0.25% and 0.5% at the open. Positive momentum in recent months has built as the economy has held up better than many had expected, and a rising number of market participants seem convinced that a new bull market not only has started but will continue for the foreseeable future.
The beginning of earnings season has definitely been a boost to the mood of investors, and a pair of financial reports helped send two stocks climbing sharply higher. Both Carvana (CVNA 8.79%) and Elevance Health (ELV -0.45%) have dealt with their share of tough times, but both companies have seen encouraging signs that have shareholders excited about their prospects. Here are the details on what's sending Carvana and Elevance upward Wednesday morning.
Carvana makes a deal with creditors
Shares of Carvana soared 29% early Wednesday morning. The online used vehicle retailer reported its latest quarterly financial results, but it also announced a restructuring of some of its outstanding obligations that could potentially give it a way to get out from under its massive debt load.
Carvana's second-quarter financial results showed just how tough conditions in the used vehicle market have been lately. Revenue of $2.97 billion was down 24% year over year, as the number of retail units sold plunged 35% to 76,530. However, Carvana's emphasis on profit showed through, as gross profit per unit came close to doubling from year-ago levels. As a result, net loss attributable to Carvana got cut by about three-fourths, coming in at $58 million or $0.55 per share.
The even bigger news, though, was that Carvana has come to an agreement with investors holding much of its senior unsecured debt. Noteholders representing more than 90% of outstanding debt agreed to a plan that would eliminate more than 83% of Carvana's debt that matures in 2025 and 2027, potentially reducing its debt load by $1.2 billion. Moreover, required cash interest expense will decline by more than $430 million per year in the next two years. A debt exchange will include new notes secured by various assets.
Many Carvana shareholders have been concerned that the company might have no way to refinance its debt as it comes due in the next few years. The agreement provides a light at the end of the tunnel and gives Carvana more time to get its financial affairs in shape, and that's really what shareholders wanted to hear.
Elevance looks healthy
Elsewhere, shares of Elevance Health were up more than 7%. The health insurance company released its second-quarter results, and investors were pleased with what they saw.
Elevance's most recent financial report had some strong numbers. Operating revenue jumped 13% year over year to $43.4 billion, driven largely by premium rate increases in its health benefits business and membership growth in Medicaid and Medicare coverage. Benefit expense ratios fell slightly, helping to boost profitability. Net income rose 13% as well to $1.85 billion, and adjusted earnings came in at $9.04 per share after some extraordinary adjustment items were accounted for.
CEO Gail Boudreaux was upbeat about the company's performance. As with some of its competitors, Elevance has sought to go beyond insurance to provide the more complete set of healthcare needs that its customers have. Boudreaux sees Elevance making the most of its more mature business lines while investing in higher-growth opportunities that could keep the company humming along well into the future.
Accordingly, Elevance boosted its guidance for 2023, expecting adjusted net income to come in at $32.85 per share or greater. That's in line with what other health insurance coverage providers have reported, and it bodes well for yet another sector of the stock market.
