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Anthem (ANTM) Misses Q4 Earnings, Memberships Increase

Zacks Equity Research

Anthem, Inc. ANTM is one of the premier healthcare service providers when it comes to providing medical and specialty products.

Already sporting one of the top position in the health insurance industry, the company is set to become a titan with the pending acquisition of another player Cigna Corp. Anthem is projected to become one of the top three health insurers. Also, the company is expected to witness significant earnings accretion from the deal.

The company has been working towards enhancing healthcare through the provision of reliable and superior quality services. The aforementioned deal is expected to help it in this regard.

However, adverse effect of the Health Insurance Provider (HIP) fee, increased financial leverage, higher medical costs in the Senior, Local Group and State-Sponsored businesses, lower favorable prior year reserve development and the impact of minimum medical loss ratio requirements are a drag.

The latest acquisition deal has been driving bullish sentiments as evident from consensus estimate being north bound. Anthem has a decent history when it comes to earnings as the stock has beaten estimates in the last four quarters, making for an average surprise of 11.9%.

Currently, Anthem holds a Zacks Rank # 3(Hold), but that could definitely change following its earnings report which was just released. We have highlighted some of the key stats from this just-revealed announcement below:

Earnings:  Anthem missed on earnings. Our consensus called for EPS of $1.23, and the company reported EPS of $1.14 and declined 38.7% year over year.

Revenue: Operating revenues surpassed our estimate. Our consensus called for revenues of $19.9 billion, and the company reported revenues of $20 billion and was up 6.6% year over year.

Key Stats to Note: Medical enrollment continues to impress us with a year over year increase of nearly 2.9%.

However, benefit expense ratio deteriorated 250 basis points on account of higher prior year reserve development in the fourth quarter of 2014 than that in 2015. The selling, general and administrative expense ratio was 16.3% in the fourth quarter of 2015, up 10 basis points year over year.  

Operating cash flow was $949.1 million, or 5.2 times net income in the fourth quarter of 2015.

2016 Outlook

The company expects net income to be greater than $10.35 per share, medical membership is expected to be in the range of 38.8 billion – 39 billion; operating revenue in the range of $80.0 - $81.0 billion.

Check back later for our full write up on this ANTM earnings report later!

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