Anthem, Inc. ANTM is poised for growth, riding on a healthy revenue stream, improving membership and solid earnings.
Following first-quarter 2020 results, the company updated its guidance for 2020. The company’s adjusted net income is now expected to be higher than $22.30 per share, indicating an increase from $19.44 reported in 2019.
It 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.
It recently delivered first-quarter earnings of $6.48 per share, which improved 7.5% year over year on the back of higher membership. Anthem’s operating revenues of $29.4 billion were up 20.7% year over year, aided by pharmacy product revenues pertaining to the IngenioRx launch. This increase was also attributable to higher premium revenues from rate increases to cover the overall cost trends including the return of the health insurance tax in 2020, and membership growth.
Medical enrollment increased 3.2% year over year to 42.1 million members, backed by Government Business enrollment and Commercial & Specialty Business.
Notably, the company retained its capital deployment despite the current environment. In the first quarter, it bought back shares worth $529 million. Moreover, the company paid out a quarterly dividend of 95 cents per share, supplementing the cash distribution of worth $240 million. In fact, in January 2020, it increased its dividend by 19%.
The company’s cash flow from operations remains impressive. In 2019 and during the first quarter of 2020, the same exceeded expectation by surging 58% year over year, mainly on the back of well-performing government business.
Anthem’s inorganic growth story bodes well. It has been actively collaborating and acquiring companies for enhancing its expansion process. Acquisitions have helped the company boost its Medicare Advantage growth over time as well as enrich its business portfolio.
Anthem’s acquisitions of Missouri and Nebraska Medicaid plans of WellCare Health in January this year also added around 300000 Medicaid members under its coverage. The company’s takeover of Beacon Health, the largest independently-held behavioral health organization in the country, should strengthen its position in the space.
However, Anthem has been incurring escalated expenses over the last several quarters, which drain its bottom line.
The Zacks Consensus Estimate for current-year earnings is pegged at $22.23, indicating an upside of 14.4% from the year-ago reported figure.
Over the past 30 days, the company has witnessed its 2020 earnings estimates move 0.6% north.
Shares of this Zacks Rank #3 (Hold) company have gained 5.1% in a year's time, underperforming its industry's rally of 13.3%. The performance looks muted when compared to other companies in the same space, such as Humana Inc. HUM, Centene Corporation CNC and Molina Healthcare Inc. MOH, which have returned 57%, 22% and 33.9% in the same time frame. While Humana holds a Zacks Rank #2 (Buy), Centene and Molina carry the same Zacks Rank as Anthem. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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