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Why Should You Retain Anthem (ANTM) Stock in Your Portfolio?

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Anthem, Inc. (ANTM - Free Report) has been in investors' good books owing to its healthy revenue stream and strategic initiatives. This leading health insurer also boasts an expanded product portfolio.

Now let’s see what makes it an investor favorite stock.

Its revenue strength is also impressive on the back of better membership and a higher premium rate. In the first quarter, revenues of $32.1 billion improved 9% year over year owing to increased premium revenues, attributable to the company’s strong Medicaid and Medicare businesses.

We expect this favorable top-line trend to continue, given its strong business growth.

Acquisitions helped the company boost its Medicare Advantage growth as well as add to its business portfolio. Anthem’s buyouts of Missouri and Nebraska Medicaid plans of WellCare Health in January 2020 also added around 300000 Medicaid members under its coverage.

The Zacks Rank #3 (Hold) company’s Beacon Health buyout, the largest independently held behavioral health organization in the country, should strengthen its position in the said space.

In March, Anthem entered into an agreement to acquire myNEXUS, Inc., a home-based nursing management company for payors. In February, it inked a deal with InnovaCare Health, L.P. to purchase its Puerto Rico-based subsidiaries including MMM Holdings. All these initiatives bode well.

The company is also making efforts to expand its digital channels. It expects progress on the back of digital growth in the upcoming months.

Following the company’s first-quarter results, Anthem revised its outlook for 2021. Adjusted net income for the current year is projected to be more than $25.10, higher than the previous estimate of higher than $24.50 per share. The company is on track to achieve a long-term 12-15% annual adjusted EPS growth target.

Medical membership is still predicted in the range of 44.1-44.7 million, the midpoint indicating an upside of 3.5% from the 2020 reported figure.
Operating revenues are anticipated at $135.1 billion, encompassing premium revenues of $114.5-$115.5 billion. The revenue guidance implies an upside of 10.9% from the 2020 reported figure.

It is noteworthy that the leading insurer resumed its share buyback activity in June 2020 on the back of its solvency position. The company expects to repurchase shares worth $1.6 billion for 2021. In January this year, the company raised its quarterly dividend by nearly 19%.

The company’s Medical membership has been rising over the last several quarters on the back of its Medicare and Medicaid businesses. In the first quarter, medical enrollment rose 3.3% year over year to 43.5 million members. Several contract wins and organic growth are expected to drive its membership.

However, the company is persistently enduring escalating expenses due to higher benefit expense along with selling, general and administrative expense, which is a headwind to the company.

Price Performance

Shares of this company have gained 35.3% in the past year, outperforming its industry’s growth of 29.9%. You can see  the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Other companies in the same space, such as The Joint Corp. (JYNT - Free Report) ,  Centene Corporation  (CNC - Free Report) and  Select Medical Holdings Corporation  (SEM - Free Report) have also rallied 361.6%, 11.3% and 148.6%, respectively, in the same time frame.

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