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Anthem Inc. delivered third-quarter 2020 earnings of $4.20 per share, which beat the Zacks Consensus Estimate by 4% on the back of solid revenues. However, the bottom line fell almost 17% year over year.
However, Anthem’s operating revenues of $30.65 billion beat the Zacks Consensus Estimate by 2.9%. Moreover, the top line was up 15.9% year over year, aided by pharmacy product revenues in relation to the launch of IngenioRx and the return of the health insurance tax in 2020. This upside was further led by higher premium revenues from growth in Medicaid and Medicare.
Medical enrollment inched up 4% year over year to 42.6 million members, backed by growth in Medicaid, National and Medicare businesses.
Anthem’s benefit expense ratio of 86.8% contracted 40 basis points (bps) from the prior-year quarter, driven by the return of the health insurance tax in 2020 and the deferral of healthcare utilization amid COVID-19 pandemic.
SG&A expense ratio of 17.3% expanded 440 bps from the year-ago quarter due to the return of the health insurance tax in 2020 and an increased spend on growth initiatives. Other causes are business optimization charges and the Blue Cross Blue Shield Association (BCBSA) litigation settlement accrual.
Strong Segmental Results
Commercial & Specialty Business
Operating revenues of $9.3 billion in the third quarter were up 0.5% year over year.
Operating loss of 234 million came against the operating gain of $924 million in the year-ago quarter.
Operating margin was (2.5)% against the year-ago quarter’s operating margin of 10%.
Government Business
Operating revenues were $18.1 billion, up 13.5% from the prior-year quarter.
Operating gain was $246 million, down 60.1% year over year due to expenses associated with the COVID-19 pandemic, business optimization charges as well as increased spend to support growth.
Operating margin was 1.4%, down 250 bps year over year.
Other
The Other segment’s operating loss of $156 million compared unfavorably with the year-earlier quarterly loss of $12 million due to business optimization charges and other unallocated corporate expenses.
IngenioRx
IngenioRx started operations in the second quarter of 2019. Operating gain from the segment was $345 million in the third quarter of 2020.
Financial Update
As of Sep 30, 2020, Anthem’s cash and cash equivalents totaled $3.9 billion, down 19.3% from the level at 2019 end.
As of Sep 30, 2020, its long-term debt less current portion increased 7.7% to $19 billion from the level at 2019 end.
Cash provided by operating activities at the end of the third quarter was $6.8 billion, up 45.2% year over year.
Capital Deployment
During the third quarter, Anthem bought back shares worth $759 million. As of Sep 30, 2020, the company had shares worth $2.4 billion remaining under its share buyback authorization.
Moreover, the company paid out a quarterly dividend of 95 cents per share, adding up to a distribution of cash worth $238 million.
The company announced a dividend of 95 cents per share on Oct 27, 2020 for the fourth quarter, payable Dec 22 to its shareholders of record as of Dec 7, 2020.
Guidance for 2020
Based on solid third-quarter results, Anthem updated its outlook for the full year. GAAP net income is expected to be greater than $17.87 per share including $4.43 of net unfavorable items. The company’s adjusted net income is now expected to be higher than $22.30 per share excluding these items.
The company withdrew all other previously issued projections for the current-year financial metrics due to the unprecedented uncertainty stemming from the COVID-19 pandemic.
Of the medical sector players that reported third-quarter results so far, earnings of UnitedHealth Group Incorporated (UNH - Free Report) and Centene Corporation (CNC - Free Report) beat the respective Zacks Consensus Estimate while that of HCA Healthcare, Inc. (HCA - Free Report) missed the same.
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Anthem (ANTM) Q3 Earnings Surpass Estimates, Decline Y/Y
Anthem Inc. delivered third-quarter 2020 earnings of $4.20 per share, which beat the Zacks Consensus Estimate by 4% on the back of solid revenues. However, the bottom line fell almost 17% year over year.
However, Anthem’s operating revenues of $30.65 billion beat the Zacks Consensus Estimate by 2.9%. Moreover, the top line was up 15.9% year over year, aided by pharmacy product revenues in relation to the launch of IngenioRx and the return of the health insurance tax in 2020. This upside was further led by higher premium revenues from growth in Medicaid and Medicare.
Anthem, Inc. Price, Consensus and EPS Surprise
Anthem, Inc. price-consensus-eps-surprise-chart | Anthem, Inc. Quote
Quarterly Operational Update
Medical enrollment inched up 4% year over year to 42.6 million members, backed by growth in Medicaid, National and Medicare businesses.
Anthem’s benefit expense ratio of 86.8% contracted 40 basis points (bps) from the prior-year quarter, driven by the return of the health insurance tax in 2020 and the deferral of healthcare utilization amid COVID-19 pandemic.
SG&A expense ratio of 17.3% expanded 440 bps from the year-ago quarter due to the return of the health insurance tax in 2020 and an increased spend on growth initiatives. Other causes are business optimization charges and the Blue Cross Blue Shield Association (BCBSA) litigation settlement accrual.
Strong Segmental Results
Commercial & Specialty Business
Operating revenues of $9.3 billion in the third quarter were up 0.5% year over year.
Operating loss of 234 million came against the operating gain of $924 million in the year-ago quarter.
Operating margin was (2.5)% against the year-ago quarter’s operating margin of 10%.
Government Business
Operating revenues were $18.1 billion, up 13.5% from the prior-year quarter.
Operating gain was $246 million, down 60.1% year over year due to expenses associated with the COVID-19 pandemic, business optimization charges as well as increased spend to support growth.
Operating margin was 1.4%, down 250 bps year over year.
Other
The Other segment’s operating loss of $156 million compared unfavorably with the year-earlier quarterly loss of $12 million due to business optimization charges and other unallocated corporate expenses.
IngenioRx
IngenioRx started operations in the second quarter of 2019. Operating gain from the segment was $345 million in the third quarter of 2020.
Financial Update
As of Sep 30, 2020, Anthem’s cash and cash equivalents totaled $3.9 billion, down 19.3% from the level at 2019 end.
As of Sep 30, 2020, its long-term debt less current portion increased 7.7% to $19 billion from the level at 2019 end.
Cash provided by operating activities at the end of the third quarter was $6.8 billion, up 45.2% year over year.
Capital Deployment
During the third quarter, Anthem bought back shares worth $759 million.
As of Sep 30, 2020, the company had shares worth $2.4 billion remaining under its share buyback authorization.
Moreover, the company paid out a quarterly dividend of 95 cents per share, adding up to a distribution of cash worth $238 million.
The company announced a dividend of 95 cents per share on Oct 27, 2020 for the fourth quarter, payable Dec 22 to its shareholders of record as of Dec 7, 2020.
Guidance for 2020
Based on solid third-quarter results, Anthem updated its outlook for the full year. GAAP net income is expected to be greater than $17.87 per share including $4.43 of net unfavorable items. The company’s adjusted net income is now expected to be higher than $22.30 per share excluding these items.
The company withdrew all other previously issued projections for the current-year financial metrics due to the unprecedented uncertainty stemming from the COVID-19 pandemic.
Zacks Rank
Anthem currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Other Medical Sector Releases
Of the medical sector players that reported third-quarter results so far, earnings of UnitedHealth Group Incorporated (UNH - Free Report) and Centene Corporation (CNC - Free Report) beat the respective Zacks Consensus Estimate while that of HCA Healthcare, Inc. (HCA - Free Report) missed the same.
Zacks’ 2020 Election Stock Report:
In addition to the companies you learned about above, we invite you to learn more about profiting from the upcoming presidential election. Trillions of dollars will shift into new market sectors after the votes are tallied, and investors could see significant gains. This report reveals specific stocks that could soar: 6 if Trump wins, 6 if Biden wins.
Check out the 2020 Election Stock Report >>