Anthem, Inc. ANTM is well-poised for development on the back of its consistent revenues and a robust capital position.
The company has witnessed 2019 earnings estimates move 0.7% north over the past 30 days.
Anthem also flaunts a commendable earnings surprise history, having outpaced the Zacks Consensus Estimate in the trailing four quarters, the average being 4.76%. This trend of consecutive estimate beats vouches for the company’s operating efficiency.
The company is well-placed for growth, evident from its favorable VGM Score of A. Here V stands for Value, G for Growth and M for Momentum with the score being a weighted combination of all three factors.
Anthem recently delivered first-quarter earnings of $6.03 per share, up 11.1% year over year, driven by higher membership and the expansion of its clinical and specialty services. Its operating revenues of $24.40 billion were up 9.2% year over year, aided by membership growth across the businesses and premium rate increases to cover the overall cost trends.
Following solid first-quarter 2019 results, the company has raised its 2019 outlook, which should instill investor confidence in the stock. Its adjusted net income is now expected to be higher than $19.20 per share, up from the prior projection of more than $19. Medical membership is still estimated in the range of 40.9-41.3 million. Operating revenues are predicted to be around $100 billion including the premium revenues of $90.5-$92.5 billion.
Moreover, its revenues have been increasing over the past many years, evident from its 5-year CAGR of 4.88% (2013-2018). The rally continued in the first quarter of 2019 with the metric rising 9.2% year over year on the back of a premium rate increase and rise in membership. We expect the company’s revenues to continue growing going forward on the back of a solid membership contribution.
The company’s sturdy capital position has driven consistent dividend payouts and share buybacks. Ever since it initiated its cash dividend in 2011, the company has raised the same by around 200% through 2018. It has also been aggressively engaged in share repurchases, utilizing its excess capital to boost shareholder value. All these have been possible because of the company’s cash flow from operations. The company projects operating cash flow to be higher than $5.2 billion for the year.
However, it has been suffering escalating expenses over the past few years due to increasing benefit expense along with the selling, general and administrative (SG&A) expense. Increasing costs might weigh down the margins, which is a concern for the company.
The long-term earnings growth rate is expected at 14.7%, above the industry’s average of 13.6%, which is an upside for the company.
The Zacks Consensus Estimate for current-year earnings per share is pegged at $19.29, representing a year-over-year increase of 21.4% on 9.7% higher revenues of $100.2 billion.
For 2020, the Zacks Consensus Estimate for earnings stands at $22.88 on $109.8 billion revenues, translating to a respective 18.6% and 9.7% year-over-year growth.
Shares of this Zacks Rank #3 (Hold) company have rallied 20.2% in a year's time, outperforming its industry’s rise of 2.7%.
Stocks to Consider
Investors interested in the medical sector can take a look at some better-ranked stocks like The Joint Corp. JYNT, Molina Healthcare, Inc MOH and WellCare Health Plans, Inc. WCG. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Joint Corp. develops, owns, operates, supports and manages chiropractic clinics. In the last four quarters, the company delivered average beat of 190%. It sports a Zacks Rank #1.
Molina offers Medicaid-related solutions to meet the health care needs of low-income families and individuals. It carries a Zacks Rank of 1. In the trailing four quarters, the company came up with average beat of 88.17%.
WellCare Health offers managed care services to government-sponsored health care programs. The company pulled off average positive surprise of 13.52% in the preceding four quarters. It has a Zacks Rank #2 (Buy).
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