U.S. Markets closed

Anthem's (ANTM) Q3 Earnings Beat Estimates, Improve Y/Y

Zacks Equity Research

Anthem Inc. ANTM delivered third-quarter 2019 earnings of $4.87 per share, marginally beating the Zacks Consensus Estimate by 0.6%.

Additionally, the bottom line improved 27.8% year over year on the back of higher revenues.

Further, Anthem reported operating revenues of $26.4 billion, beating the Zacks Consensus Estimate by 4.1%. Moreover, the top line was up 15.1% year over year, aided by membership growth across businesses, growth in value-added services 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 2.7% year over year to 41 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 87.2% expanded 240 basis points (bps) from the prior-year quarter. This increase was attributable to one-year waiver of the health insurance tax in 2019.

SG&A expense ratio of 12.9% contracted 250 bps from the year-ago quarter owing 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 $9.2 billion in the second quarter, up 3.9% year over year.

Operating gain totaled $930 million, up 11.5% million year over year. This increase is driven by more penetration of value-added services, such as pharmacy and integrated health offerings. However, the same was partly offset by unfavorable reserve development.

Operating margin was 10%, up 70 basis points (bps) year over year.

Government Business

Operating revenues were $16 billion, up 14.1% from the prior-year quarter.
Operating gain was $616 million, up 35.1% year over year, driven by better medical cost performance in Medicaid. However, the same was offset by one-year waiver of the health insurance tax to some extent.

Operating margin was 3.9%, up 60 bps year over year.

Other

The Other segment’s operating loss of $18 million is narrower than the year-earlier quarterly loss of $41 million.

Financial Update

As of Sep 30, 2019, Anthem’s cash and cash equivalents summed $4.2 billion, up 6.5% from 2018 end.

As of Sep 30, 2019, its long-term debt less current portion increased 9.3% to $18.8 billion from the level at 2018 end.

Operating cash flow at the end of the first nine months of 2019 was $4.7 billion, up 40.7% year over year.

Capital Deployment

During the third quarter, Anthem bought back shares worth $644 million. As of Sep 30, 2019, the company had shares worth around $4.1 billion remaining under its share buyback authorization.

Moreover, the company paid out a quarterly dividend of 80 cents per share, adding up to a cash distribution worth $204 million.

The company announced a fourth-quarter dividend of 80 cents per share on Oct 22, 2019, payable Dec 20 to shareholders of record on Dec 5, 2019.

Revised Guidance for 2019

Based on solid third-quarter results, Anthem has updated its outlook for 2019.

The company’s adjusted net income is now expected to be higher than $19.40 per share, up from the prior projection of $19.30.

Medical membership is estimated to be around 41 million.

Operating revenues are predicted to be around $103 billion, up from the earlier estimate of $102 billion. This includes premium revenues of $94-$95 billion.

Operating cash flow is now anticipated to be higher than $5.5 billion.

SG&A ratio is forecast in the band of 13-13.3%, lower than the earlier outlook of 13.2-13.5%.

The company estimates the benefit expense ratio to be 86.5-86.8%, up from the range of 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

Some better-ranked stocks from the medical sector are as follows:
Molina Healthcare, Inc MOH is set to report third-quarter 2019 earnings performance on Oct 29. The stock has a Zacks Rank of 3 and an Earnings ESP of +0.92%.

MEDNAX, Inc MD is set to report third-quarter 2019 earnings on Nov 1. The stock has an Earnings ESP of +1.10% and is Zacks #3 Ranked. You can see the complete list of today’s Zacks #1 Rank stocks here.

AmerisourceBergen Corporation ABC has an Earnings ESP of +0.55% and is a #3 Ranked stock. The company is set to report third-quarter earnings on Nov 7.

Wall Street’s Next Amazon

Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.

Click for details >>


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
 
Molina Healthcare, Inc (MOH) : Free Stock Analysis Report
 
Anthem, Inc. (ANTM) : Free Stock Analysis Report
 
Mednax, Inc (MD) : Free Stock Analysis Report
 
AmerisourceBergen Corporation (ABC) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research