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Anthem's (ANTM) Q1 Earnings Miss Estimates, Improve Y/Y
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Anthem Inc. delivered first-quarter 2020 earnings of $6.48 per share, which missed the Zacks Consensus Estimate by 0.9%. However, the bottom line improved 7.5% year over year on the back of higher membership.
Anthem reported operating revenues of $29.4 billion, which beat the Zacks Consensus Estimate by 2.6%. Moreover, the top line was up 20.7% year over year, aided by pharmacy product revenues related to the launch of IngenioRx. The increase was further attributable to higher premium revenues from rate increases to cover 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.
Anthem’s benefit expense ratio of 84.2% decreased 20 basis points (bps) from the prior-year quarter, driven by the return of the health insurance tax in 2020, partially offset by the extra calendar day in the first quarter of 2020 and margin normalization in the Individual business.
SG&A expense ratio of 12.8% contracted 20 bps from the year-ago quarter driven by growth in operating revenues, partially offset by the return of the health insurance tax in 2020 and increased spend to support growth initiatives.
Strong Segmental Results
Commercial & Specialty Business
Operating revenues were $9.4 billion in the first quarter, down 0.3% year over year.
Operating gain totaled $1.4 billion, down 11.1% year over year due to margin normalization in the Individual business and the shift of pharmacy earnings to the IngenioRx segment. The decrease was further due to the impact of one extra calendar day compared to the prior-year quarter, partially offset by growth in value-added services.
Operating margin was 15.2%, down 180 bps year over year.
Government Business
Operating revenues were $17.5 billion, up 17% from the prior-year quarter.
Operating gain was $411 million, up 9.9% year over year on the back of higher premiums from rate adjustments and membership growth in the Medicaid business as well as the return of the health insurance tax in 2020, partially offset by higher selling, general, and administrative spend to support growth as well as the impact of one extra calendar day compared to the prior-year quarter.
Operating margin was 2.4%, down 10 bps year over year.
Other
The Other segment’s operating profit was $14 million against year-earlier quarterly loss of $32 million.
Financial Update
As of Mar 31, 2020, Anthem’s cash and cash equivalents totaled $5.3 billion, up 8.3% from year-end 2019.
As of Mar 31, 2020, its long-term debt less current portion increased 6.8% to $19 billion from the level at 2019 end.
Operating cash outflow at the end of the first quarter was $2.5 billion, up 54.3% from the figure as of Mar 31, 2019.
Capital Deployment
During the first quarter, Anthem bought back shares worth $529 million. As of Mar 31, 2020, the company had shares worth around $3.3 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 $240 million.
The company announced a dividend of 95 cents per share on Apr 28, 2020 for the second quarter, payable on Jun 25 to shareholders of record as of Jun 10, 2020.
Revised Guidance for 2020
Based on solid first-quarter results, Anthem updated its guidance for 2020. GAAP net income is expected to be greater than $18.27 per share, including approximately 93 cents per share of net unfavorable items. The company’s adjusted net income is now expected to be higher than $22.30 per share.
The company has withdrawn all other previously issued financial guidance metrics for 2020 due to unprecedented uncertainty around the COVID-19 pandemic and its impact.
Of the medical sector players that have reported first-quarter results so far, UnitedHealth Group Incorporated (UNH - Free Report) beat the Zacks Consensus Estimate for earnings, while Centene Corporation (CNC - Free Report) and HCA Healthcare, Inc. (HCA - Free Report) missed the same.
Zacks Top 10 Stocks for 2020
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2020?
Last year's 2019 Zacks Top 10 Stocks portfolio returned gains as high as +102.7%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don’t miss your chance to get in on these long-term buys.
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Anthem's (ANTM) Q1 Earnings Miss Estimates, Improve Y/Y
Anthem Inc. delivered first-quarter 2020 earnings of $6.48 per share, which missed the Zacks Consensus Estimate by 0.9%. However, the bottom line improved 7.5% year over year on the back of higher membership.
Anthem reported operating revenues of $29.4 billion, which beat the Zacks Consensus Estimate by 2.6%. Moreover, the top line was up 20.7% year over year, aided by pharmacy product revenues related to the launch of IngenioRx. The increase was further attributable to higher premium revenues from rate increases to cover overall cost trends, including the return of the health insurance tax in 2020, and membership growth.
Anthem, Inc. Price, Consensus and EPS Surprise
Anthem, Inc. price-consensus-eps-surprise-chart | Anthem, Inc. Quote
Quarterly Operational Update
Medical enrollment increased 3.2% year over year to 42.1 million members, backed by Government Business enrollment and Commercial & Specialty Business.
Anthem’s benefit expense ratio of 84.2% decreased 20 basis points (bps) from the prior-year quarter, driven by the return of the health insurance tax in 2020, partially offset by the extra calendar day in the first quarter of 2020 and margin normalization in the Individual business.
SG&A expense ratio of 12.8% contracted 20 bps from the year-ago quarter driven by growth in operating revenues, partially offset by the return of the health insurance tax in 2020 and increased spend to support growth initiatives.
Strong Segmental Results
Commercial & Specialty Business
Operating revenues were $9.4 billion in the first quarter, down 0.3% year over year.
Operating gain totaled $1.4 billion, down 11.1% year over year due to margin normalization in the Individual business and the shift of pharmacy earnings to the IngenioRx segment. The decrease was further due to the impact of one extra calendar day compared to the prior-year quarter, partially offset by growth in value-added services.
Operating margin was 15.2%, down 180 bps year over year.
Government Business
Operating revenues were $17.5 billion, up 17% from the prior-year quarter.
Operating gain was $411 million, up 9.9% year over year on the back of higher premiums from rate adjustments and membership growth in the Medicaid business as well as the return of the health insurance tax in 2020, partially offset by higher selling, general, and administrative spend to support growth as well as the impact of one extra calendar day compared to the prior-year quarter.
Operating margin was 2.4%, down 10 bps year over year.
Other
The Other segment’s operating profit was $14 million against year-earlier quarterly loss of $32 million.
Financial Update
As of Mar 31, 2020, Anthem’s cash and cash equivalents totaled $5.3 billion, up 8.3% from year-end 2019.
As of Mar 31, 2020, its long-term debt less current portion increased 6.8% to $19 billion from the level at 2019 end.
Operating cash outflow at the end of the first quarter was $2.5 billion, up 54.3% from the figure as of Mar 31, 2019.
Capital Deployment
During the first quarter, Anthem bought back shares worth $529 million. As of Mar 31, 2020, the company had shares worth around $3.3 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 $240 million.
The company announced a dividend of 95 cents per share on Apr 28, 2020 for the second quarter, payable on Jun 25 to shareholders of record as of Jun 10, 2020.
Revised Guidance for 2020
Based on solid first-quarter results, Anthem updated its guidance for 2020. GAAP net income is expected to be greater than $18.27 per share, including approximately 93 cents per share of net unfavorable items. The company’s adjusted net income is now expected to be higher than $22.30 per share.
The company has withdrawn all other previously issued financial guidance metrics for 2020 due to unprecedented uncertainty around the COVID-19 pandemic and its impact.
Zacks Rank
Anthem currently carries a Zacks Rank #3 (Hold). 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 have reported first-quarter results so far, UnitedHealth Group Incorporated (UNH - Free Report) beat the Zacks Consensus Estimate for earnings, while Centene Corporation (CNC - Free Report) and HCA Healthcare, Inc. (HCA - Free Report) missed the same.
Zacks Top 10 Stocks for 2020
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2020?
Last year's 2019 Zacks Top 10 Stocks portfolio returned gains as high as +102.7%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don’t miss your chance to get in on these long-term buys.
Access Zacks Top 10 Stocks for 2020 today >>