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Is a Beat in the Cards for Anthem's (ANTM) Q1 Earnings?

Zacks Equity Research

Anthem Inc. ANTM will release first-quarter 2019 results on Apr 24 before market open. In fourth-quarter 2018, the company delivered a positive earnings surprise of 10.9%, driven by a solid operating performance and increased contribution from its Government business and Commercial & Specialty Business segments.

Let’s see, how things are shaping up for this announcement.

The Zacks Consensus Estimate for earnings is pegged at $5.86, up 8.3% year over year. This upside would likely be supported by a robust operating performance and strength displayed at all its businesses.

Anthem’s revenues have been rising over the last few quarters. The Zacks Consensus Estimate for first-quarter revenues is pegged at $24.3 billion, up 8.5% year over year. Both its Government business and Commercial & Specialty Business segments are likely to contribute to the bottom line. The consensus mark for the Commercial Business segment and the Government business is expected to witness a respective year-over-year rise of 14.3% and 3.1% in revenues.

Total medical membership for the first quarter is likely to grow owing to the company’s constant efforts to boost its portfolio. Higher membership is expected in Medicare business as the company is thoroughly focusing on growing this line of business. The company expects Medicare Advantage membership to be more than 1,50,000 in the first quarter of 2019. The Zacks Consensus Estimate for total membership stands at 41.4 million, up 4.6% year over year.

However, we predict an increase in the selling, general and administrative expense ratio as the company escalates investment in areas, such as technology modernization, population and consumer digital health plus data analytics and product development capabilities.

What the Quantitative Model States

Our proven model conclusively shows that Anthem is likely to beat on earnings this time around. This is because the stock has the right combination of a positive Earnings ESP and a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen.

Earnings ESP: Anthem has an Earnings ESP of +1.29%. This is because the Most Accurate Estimate is pegged at $5.94, higher than the Zacks Consensus Estimate of $5.86. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

Anthem, Inc. Price and EPS Surprise

Anthem, Inc. Price and EPS Surprise | Anthem, Inc. Quote

Zacks Rank: Anthem carries a Zacks Rank #2, which increases the predictive power of ESP. Along with a positive ESP in the combination, chances of an earnings beat are significantly higher for the stock this reporting cycle.

Conversely, the Sell-rated stocks (#4 or 5) should never be considered going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Other Stocks to Consider

Some other stocks worth considering from the Health Maintenance Organization industry with the perfect combination of elements to also surpass estimates in the next releases are as follows:

WellCare Health Plans, Inc. WCG is set to report first-quarter 2019 earnings on Apr 30. The stock has an Earnings ESP of +1.91% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Molina Healthcare, Inc. MOH is set to report first-quarter earnings on Apr 29. The stock has a Zacks Rank of 1 and an Earnings ESP of +3.49%.

Humana Inc. HUM has an Earnings ESP of +0.84% and a Zacks Rank of 3. The company is set to report first-quarter earnings on May 1.

Zacks' Top 10 Stocks for 2019

In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-holds for the year?

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Molina Healthcare, Inc (MOH) : Free Stock Analysis Report
 
WellCare Health Plans, Inc. (WCG) : Free Stock Analysis Report
 
Humana Inc. (HUM) : Free Stock Analysis Report
 
Anthem, Inc. (ANTM) : Free Stock Analysis Report
 
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