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What's in the Cards for Anthem (ANTM) This Earnings Season?

Zacks Equity Research

Anthem Inc. ANTM will release fourth-quarter 2018 results on Jan 30, before the market opens. In the last reported quarter, the company delivered a positive earnings surprise of 3.8%, led by a strong operating performance.

The Zacks Consensus Estimate for fourth-quarter earnings is expected at $2.20, up 70.5% from the prior-year quarter.

Let’s see, how things are shaping up for fourth-quarter announcement.

The company’s revenues have been rising over the last few quarters. Also, in the quarter to be reported, we expect the top line to grow on the back of a robust Government Business segment. However, this upside can be partially upset by lower contribution from Commercial & Specialty business due to lower medical membership. The Zacks Consensus Estimate for fourth-quarter revenues stands at $23.4 billion, up 4.1% year over year.

The Zacks Consensus Estimate for Government business revenues is pegged at $12.7 billion, up 3.3% year over year. The segment is expected to perform well because of membership growth in Medicare business from America’s 1st Choice and HealthSun acquisitions as well as solid organic growth in the existing markets.

The Zacks Consensus Estimate for the company’s total national membership in the quarter under review stands at $13.4 billion, up 1.8% year over year. The upside is likely to be driven by the company’s Medicare Advantage business. Moreover, the Zacks Consensus Estimate for Bluecard membership is pegged at 2.1% growth.

The company has likely maintained its focus on improving its operational efficiency. Also, digital capabilities, consolidation and migration of systems poise the company well for growth.

Anthem is expected to have continued with its capital deployment in the fourth quarter via share repurchase. However, we predict an increase in selling, general and administrative expense ratio as the company steadily invests in areas such as technology modernization.  Escalating costs might weigh down its margins.

What the Quantitative Model States

Our proven model clearly indicates that Anthem is likely to beat on earnings this quarter to be reported. 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 +1.69%. This is because the Most Accurate Estimate is pegged at $2.24, higher than the Zacks Consensus Estimate of $2.20. 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 #3, which increases the predictive power of ESP. Along with a positive ESP, the combination raises the odds of a likely earnings surprise.

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 medical sector with the perfect mix of elements to surpass estimates in the next releases are as follows:

Universal Health Services, Inc. UHS is slated to release fourth-quarter earnings figures on Feb 27. The stock has an Earnings ESP of +2.50% and a Zacks Rank of 3.You can see the complete list of today’s Zacks #1 Rank stocks here.

Mednax, Inc MD has an Earnings ESP of +0.12%. This #3 Ranked company is set to report fourth-quarter earnings on Feb 7.

Molina Healthcare, Inc MOH is set to report fourth-quarter 2018 earnings performance on Feb 11. The stock has an Earnings ESP of +2.89% and is a Zacks #1 Ranked player.

 

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