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Why Should You Retain Anthem (ANTM) Stock in Your Portfolio?
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Anthem, Inc. is poised for growth, riding on a healthy revenue stream, improving membership and solid earnings.
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.
The company delivered June-quarter earnings of $9.20 per share, which beat the Zacks Consensus Estimate by 4.9% on the back of Medicaid and Medicare businesses. Moreover, the bottom line jumped 98.3% year over year. The top line was also up 15.9% year over year, aided by pharmacy product revenues in relation to the launch of IngenioRx. Further, this increase was led by higher premium revenues from growth in Medicaid and Medicare and the return of the health insurance tax in 2020.
Following robust second-quarter 2020 results, Anthem updated its guidance for the current year. GAAP net income is expected to be greater than $20.91 per share including $1.39 of net unfavorable items. The company’s adjusted net income is now estimated to be higher than $22.30 per share excluding certain items.
The company witnessed a rise in Telehealth and virtual services amid the pandemic. On its last earnings call, management confirmed that the company catered to 475,000 telehealth visits in 82,000 COVID-19 assessments. Given the current scenario and rising demand for telemedicine in behavioral health as well, the company expects this business to consistently fare well.
In addition, the company retained its capital deployment despite the current environment. Its dividend yield stands at 1.3%, above the industry's average of 1.2%. The company’s cash flow from operations remains impressive too. In the first six months of 2020, the same exceeded expectation by surging 161.7% year over year. Moreover, the company expects to buy back more than $1.5 billion of shares for the year.
Anthem’s top-line improvement remains encouraging as well, witnessing a 4-year CAGR of 7.1% (2015-2019) on the back of a premium rate increase and higher membership. For the first six months of 2020, its operating revenues of $58.6 billion were up 18.3% year over year owing to contribution from pharmacy product revenues.
Also, medical enrollment increased 3.9% year over year to 42.1 million members, backed by Government Business enrollment and Commercial & Specialty Business in the first half of 2020. The company is now the fourth largest individual Medicare Advantage plan in the nation.
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 $22.42, indicating an upside of 15.3% from the year-ago reported figure.
Shares of this presently Zacks Rank #3 (Hold) company have gained 8.5% in a year's time, underperforming its industry's rally of 23%.
The price performance looks muted when compared with other companies’ stock movements in the same space, such as Humana Inc. (HUM - Free Report) , Centene Corporation (CNC - Free Report) and Molina Healthcare Inc. (MOH - Free Report) , which have returned 41.6%, 33.2% and 42.3% each in the same time frame. While Humana holds a Zacks Rank #2 (Buy), Centene and Molina carry the same Zacks Rank as Anthem, currently. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Why Should You Retain Anthem (ANTM) Stock in Your Portfolio?
Anthem, Inc. is poised for growth, riding on a healthy revenue stream, improving membership and solid earnings.
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.
The company delivered June-quarter earnings of $9.20 per share, which beat the Zacks Consensus Estimate by 4.9% on the back of Medicaid and Medicare businesses. Moreover, the bottom line jumped 98.3% year over year. The top line was also up 15.9% year over year, aided by pharmacy product revenues in relation to the launch of IngenioRx. Further, this increase was led by higher premium revenues from growth in Medicaid and Medicare and the return of the health insurance tax in 2020.
Following robust second-quarter 2020 results, Anthem updated its guidance for the current year. GAAP net income is expected to be greater than $20.91 per share including $1.39 of net unfavorable items. The company’s adjusted net income is now estimated to be higher than $22.30 per share excluding certain items.
The company witnessed a rise in Telehealth and virtual services amid the pandemic. On its last earnings call, management confirmed that the company catered to 475,000 telehealth visits in 82,000 COVID-19 assessments. Given the current scenario and rising demand for telemedicine in behavioral health as well, the company expects this business to consistently fare well.
In addition, the company retained its capital deployment despite the current environment. Its dividend yield stands at 1.3%, above the industry's average of 1.2%. The company’s cash flow from operations remains impressive too. In the first six months of 2020, the same exceeded expectation by surging 161.7% year over year. Moreover, the company expects to buy back more than $1.5 billion of shares for the year.
Anthem’s top-line improvement remains encouraging as well, witnessing a 4-year CAGR of 7.1% (2015-2019) on the back of a premium rate increase and higher membership. For the first six months of 2020, its operating revenues of $58.6 billion were up 18.3% year over year owing to contribution from pharmacy product revenues.
Also, medical enrollment increased 3.9% year over year to 42.1 million members, backed by Government Business enrollment and Commercial & Specialty Business in the first half of 2020. The company is now the fourth largest individual Medicare Advantage plan in the nation.
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 $22.42, indicating an upside of 15.3% from the year-ago reported figure.
Shares of this presently Zacks Rank #3 (Hold) company have gained 8.5% in a year's time, underperforming its industry's rally of 23%.
The price performance looks muted when compared with other companies’ stock movements in the same space, such as Humana Inc. (HUM - Free Report) , Centene Corporation (CNC - Free Report) and Molina Healthcare Inc. (MOH - Free Report) , which have returned 41.6%, 33.2% and 42.3% each in the same time frame. While Humana holds a Zacks Rank #2 (Buy), Centene and Molina carry the same Zacks Rank as Anthem, currently. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Hottest Tech Mega-Trend of All
Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>