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Why Anthem (ANTM) is an Attractive Pick for Your Portfolio

Zacks Equity Research

Anthem, Inc. ANTM is well-poised for growth on the back of healthy revenue stream, growing membership and strategic initiatives.

The company flaunts a stellar earnings surprise history, having outpaced the Zacks Consensus Estimate in all the trailing four quarters, the average being 3.3%. This trend of consecutive estimate beats vouches for the company’s operating efficiency.

It raised its 2019 guidance after second-quarter results, according to which it now expects its earnings to be more than $19.30 per share. Operating revenues are predicted to be around $102 billion including the premium revenues of $93-$94 billion.

Anthem is well-placed for growth, evident from its favorable VGM Score of B. Here V stands for Value, G for Growth and M for Momentum with the score being a weighted combination of all three factors.

Moreover, the company has been witnessing a healthy top line for the last several quarters. This upside is evident from its 5-year CAGR of 4.88% (2013-2018). Even in the first six months of 2019, the momentum continued on the back of higher membership and premium rate increase. Given its strong fundamentals such as strategic initiatives, the company’s top line is expected to steadily rise further in the upcoming quarters.

The company has been enjoying increasing membership over the last many quarters. Although the metric dipped 0.9% in 2018, the same was up 23.3% in the first half of 2019. Medical membership is estimated in the 41-41.3 million range for 2019, indicating a 3% rise from the 2018 reported figure.

Anthem has been actively collaborating with companies and acquiring the same for enhancing its expansion process. Some significant acquisitions ones are America’s 1st Choice of South Carolina, Inc. and CVS Health, which helped the company grow. Besides, alliances with several companies are anticipated to accelerate progress.

Anthem has been gaining investor’s confidence because of its solid capital position, which has enabled it to pay out dividends as well as repurchase shares. The company initiated cash dividends in early 2011 and hiked its dividend by about 200% from 2011 to 2018. It has also been aggressively engaged in share buybacks, utilizing its excess capital to boost shareholder value. Its cash flow stream remains impressive, reflecting its 2013-2018 CAGR of 4.54%. The company projects operating cash flow to be higher than $5.2 billion for the current year, suggesting a surge of around 36% from 2018’s reported number.

Shares of this Zacks Rank #2 (Buy) company have lost 5.2% in a year's time, narrower than its industry’s decline of 13%.


Other Stocks to Consider

Investors interested in the medical sector can also take a look at other top-ranked stocks like Molina Healthcare, Inc. MOH, Centene Corporation CNC, The Ensign Group, Inc. ENSG, each carrying the same favorable Zacks Rank as Anthem. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Molina offers Medicaid-related solutions to meet the health care needs of low-income families and individuals. In the trailing four quarters, the company came up with average beat of 66.9%.

Centene works as a diversified and multi-national healthcare enterprise in the United States. In the preceding four quarters, the company pulled off average beat of 4.6%.

Ensign Group provides health care services. In the last four quarters, the company delivered average beat of 2.49%.

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