U.S. Markets closed

Anthem's (ANTM) Q2 Earnings Beat Estimates, Increase Y/Y

Zacks Equity Research

Anthem Inc. ANTM delivered second-quarter 2019 earnings of $4.64 per share, marginally beating the Zacks Consensus Estimate by 0.7%. Additionally, the bottom line improved 9.2% year over year on the back of higher revenues.

Further, Anthem reported operating revenues of $25.2 billion, beating the Zacks Consensus Estimate by 2.1%. Moreover, the top line was up 10.8% year over year, aided by membership growth across businesses and the premium rate increases to cover the overall cost trends. However, this upside was partially offset by the year-long waiver of the health insurance tax in 2019.

Quarterly Operational Update

Medical enrollment inched up 3.3% year over year to 40.9 million members, backed by growth in Medicaid and Medicare, partly offset by the declines in Commercial & Specialty Business enrollment.

Anthem’s benefit expense ratio of 86.7% expanded 330 basis points (bps) from the prior-year quarter. The increase was attributable to one-year waiver of the health insurance tax in 2019 and the medical cost in the Medicaid business.

SG&A expense ratio of 13% contracted 210 bps from the year-ago quarter towing to the year-long waiver of the health insurance tax in 2019 plus growth in the operating revenues.

Anthem, Inc. Price, Consensus and EPS Surprise

Anthem, Inc. Price, Consensus and EPS Surprise

Anthem, Inc. price-consensus-eps-surprise-chart | Anthem, Inc. Quote

Strong Segmental Results

Commercial & Specialty Business


Operating revenues were $8.9 billion in the second quarter, down 1.1% year over year.

Operating gain totaled $983 million, down 6.2% year over year. This decline is due to the effect of higher favorable risk adjustor adjustments recognized in 2018.

Operating margin was 10.4%, down 120 bps year over year.

Government Business

Operating revenues were $15.5 billion, up 14.1% from the prior-year quarter.

Operating gain was $478 million, down 10.2% year over year due to persistently elevated medical cost experience in Medicaid across select states and the one-year waiver of the health insurance tax in 2019. However, the same was offset by out-of-period revenue adjustments and Medicare membership improvement.

Operating margin was 3.1%, down 80 bps year over year.

Other

The Other segment’s operating loss of $28 million is wider than the year-earlier quarterly loss of $21 million.

Financial Update

As of Jun 30, 2019, Anthem’s cash and cash equivalents summed $4.1 billion, up 3.7% from 2018 end.

As of Jun 30, 2019, its long-term debt less current portion inched up 1.3% to $17.4 billion from the level at 2018 end.

Operating cash outflow at the end of the first six months of 2019 was $3.1 billion, up 11.2% year over year.

Capital Deployment

During the second quarter, Anthem bought back shares worth $458 million. As of Jun 30, 2019, the company had shares worth around $4.7 billion remaining under its share buyback authorization.

Moreover, the company paid out a quarterly dividend of 80 cents per share, adding up to a distribution of cash worth $206 million.

The company announced a third-quarter dividend of 80 cents per share on Jul 23, 2019, payable Sep 25 to shareholders of record on Sep 10, 2019.

Revised Guidance for 2019

Based on solid second-quarter results, Anthem has updated its outlook for 2019. The company’s adjusted net income is now expected to be higher than $19.30 per share, up from the prior projection of $19.20.

Medical membership is still estimated in the range of 41-41.3 million, tightened from the earlier expectation of 40.9-41.3 million.

Operating revenues are predicted to be around $102 billion including the premium revenues of $93-$94 billion. Operating cash flow is envisioned to be higher than $5.2 billion.

SG&A ratio is forecast in the band of 13.2-13.5%.

The company estimates the benefit expense ratio to be 86.2-86.5%.

Zacks Rank

Anthem carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Upcoming Releases From Medical Sector

Molina Healthcare, Inc MOH is set to report second-quarter earnings performance on Jul 29. The consensus estimate for second-quarter earnings is pinned on $2.56. The stock sports a Zacks Rank #1.

WellCare Health Plans, Inc. WCG is set to report second-quarter earnings on Jul 30. The Zacks Consensus Estimate for the same is pegged at $4.10. The stock has a Zacks Rank #2 (Buy).

Humana Inc. HUM is set to report second-quarter earnings on Jul 31. The Zacks Consensus Estimate for the same stands at $5.24. The company has a Zacks Rank of 3.

The Hottest Tech Mega-Trend of All

Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.

See Zacks' 3 Best Stocks to Play This Trend >>
 


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
Anthem, Inc. (ANTM) : Free Stock Analysis Report
 
Humana Inc. (HUM) : Free Stock Analysis Report
 
Molina Healthcare, Inc (MOH) : Free Stock Analysis Report
 
WellCare Health Plans, Inc. (WCG) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research