It has been about a month since the last earnings report for Anthem (
ANTM Quick Quote ANTM - Free Report) . Shares have added about 3% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Anthem due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Anthem's Q1 Earnings Beat Estimates, Increase Y/Y Anthem delivered first-quarter 2021 earnings of $7.01 per share, which beat the Zacks Consensus Estimate of $6.86 by 2.2%. Further, the bottom line increased 8.2% year over year on the back of better revenues. Nevertheless, Anthem’s operating revenues of $32.1 billion missed the Zacks Consensus Estimate by 3.4%. However, the top line improved 9% year over year owing to increased premium revenues, attributable to the company’s strong Medicaid and Medicare businesses. Pharmacy product revenues recognized from the launch of IngenioRx also contributed to the same. Quarterly Operational Update
Anthem’s benefit expense ratio of 85.6% expanded 140 basis points (bps) from the prior-year quarter, primarily due to lower non-COVID healthcare utilization amid the pandemic as well as the repeal of the health insurance tax in 2021. However, this was partially offset by non-COVID healthcare utilization, etc. SG&A expense ratio of 12.2% contracted 60 bps from the year-ago quarter on the back of repealing the health insurance tax in 2021 and better operating revenues. Total expenses of the company increased 9.7% year over year to $30.2 billion due to higher benefit expense, cost of products sold, and selling, general and administrative expenses.
Segmental Results Commercial & Specialty Business
Operating revenues of $9.5 billion in the first quarter were up 1.4% year over year. The segment reported an operating gain of $1.268 billion, which declined 10.7% year over year. Operating margin was 13.4%, which contracted 180 bps from the year-ago quarter’s figure.
Operating revenues were $19.2 billion, up 10.4% from the prior-year quarter. Operating gain was $478 million, up 16.3% year over year, driven by a rise in Medicaid membership and the effect of one less calendar day. However, the same was partly offset by expenses related to COVID-19, net of reduced non-COVID healthcare utilization, experience-rated rebates in the Medicaid business and lower-risk revenues.
While operating gain from the segment was $407 million in first-quarter 2021, operating margin for the same came in at 6.7%. Operating gain in the segment rose 16.6% year over year on the back of an out-of-period adjustment and growth in integrated medical and pharmacy membership.
Operating revenues were $2.3 billion, which soared 130.8% from the prior-year quarter. The Other segment’s gain of $8 million compared unfavorably with the year-earlier quarterly gain of $14 million.
As of Mar 31, 2021, Anthem’s cash and cash equivalents totaled $9.3 billion, up 62.4% from the level at 2020 end. As of Mar 31, 2021, its long-term debt less current portion increased 16.5% to $22.5 billion from the level at 2020 end. Operating cash outflow was $2.5 billion for first-quarter 2021.
During the first quarter, Anthem bought back shares worth $1.4 billion. As of Mar 31, 2021, the company had shares worth $5.6 billion remaining under its share buyback authorization. Moreover, the company paid out a quarterly dividend of $1.13 per share, adding up to a distribution of cash worth $277 million. The company announced a dividend of $1.13 per share on Apr 20, 2021 for second-quarter 2021. The new dividend will be payable Jun 25, 2021 to its shareholders of record as of Jun 10, 2021.
Guidance for 2021
Following the company’s first-quarter results, Anthem raised its full-year outlook. Adjusted net income for the current year is projected to be more than $25.10 per share. Medical membership is still forecast in the range of 44.1-44.7 million. Operating revenues are anticipated at $135.1 billion including premium revenues of $114.5-$115.5 billion. Also, the company still estimates an operating cash flow of more than $5.7 billion. The company predicts the benefit expense ratio at 88%, plus or minus 50 bps. For the current year, investment income is expected to be $970 million.
Anthem envisions its SG&A ratio in the range of 10.8%, plus or minus 50 bps. How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended upward during the past month.
At this time, Anthem has a nice Growth Score of B, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Anthem has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.