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Anthem's (ANTM) Q2 Earnings Beat Estimates, Decline Y/Y

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Anthem, Inc. (ANTM - Free Report) delivered second-quarter 2021 earnings of $7.03 per share, which beat the Zacks Consensus Estimate of $6.34 by 10.9% owing to better revenues and solid Medicaid and Medicare businesses.

The bottom line, however, decreased 23.6% year over year.

Anthem’s operating revenues of $33.3 billion beat the Zacks Consensus Estimate marginally by 0.6%. The top line improved 14.1% year over year on increased premium revenues, attributable to the company’s strong Medicaid and Medicare businesses along with higher rates to cover cost trend.

Pharmacy product revenues recognized from the launch of IngenioRx also contributed to the same.

Anthem, Inc. Price, Consensus and EPS Surprise

Anthem, Inc. Price, Consensus and EPS Surprise

Anthem, Inc. price-consensus-eps-surprise-chart | Anthem, Inc. Quote

Quarterly Operational Update

Anthem’s benefit expense ratio of 86.8% expanded 890 basis points (bps) from the prior-year quarter, primarily due to increased non-COVID healthcare utilization as well as COVID-related healthcare costs.

SG&A expense ratio of 11.5% contracted 240 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 20.6% year over year to $31.5 billion due to higher benefit expense, cost of products sold.

Segmental Results

Commercial & Specialty Business

Operating revenues of $9.6 billion in the first quarter were up 8.7% year over year.

The segment reported an operating gain of $791 million, which decreased 42.3% year over year. The reduction was mainly due to a hike in non-COVID related utilization, expenses related to COVID-19 pandemic and investments to support growth.

Operating margin was 6.3%, which contracted 520 bps from the year-ago quarter’s figure.

Government Business

Operating revenues were $20 billion, up 16.4% from the prior-year quarter.
Operating gain was $868 million, down 46.4% year over year due to higher non-COVID utilization and COVID-19-related expenses. However, the same was partly offset by membership growth in the Medicaid and Medicare businesses.

IngenioRx

Operating gain from the segment was $405 million in second-quarter 2021. Operating gain in the segment rose 33.2% year over year on the back of growth in integrated medical and pharmacy membership.

Other

Operating revenues were $2.5 billion, which soared 73.3% from the prior-year quarter.

The Other segment’s gain of $17 million compared unfavorably with the year-earlier quarterly gain of $66 million.

Financial Update (as of Jun 30, 2021)

Anthem’s cash and cash equivalents totaled $5.2 billion, down 8.4% from the level at 2020 end.

The company’s long-term debt less current portion increased 14.9% to $22.2 billion from the level at 2020 end.

Cash provided by operating activities was $4.1 billion for the first six months of 2021, down 47.8% year over year.

Capital Deployment

During the second quarter, Anthem bought back shares worth $480 million. As of Jun 30, 2021, the company had shares worth $5.2 billion remaining under its share buyback authorization.

The company paid out a quarterly dividend of $1.13 per share, adding up to a distribution of cash worth $278 million.

The company announced a dividend of $1.13 per share on Jul 20, 2021 for third-quarter 2021. The new dividend will be payable Sep 24, 2021 to its shareholders of record as of Sep 10, 2021.

Guidance for 2021

Following the company’s second-quarter results, Anthem raised its full-year outlook.

Adjusted net income for the current year is projected to be more than $25.50 per share, higher than the prior estimate of more than $25.10.
Medical membership is still forecast in the range of 44.8-45.3 million, up from the previous band of 44.1-44.7 million.

Operating revenues are anticipated at $137.1 billion including premium revenues of $116.5-$117.5 billion compared with the previous estimate of $135.1 billion.

The company reaffirms its operating cash flow view of more than $5.8 billion.

For the current year, investment income is expected to be $1.1 billion.

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, the bottom-line results of  UnitedHealth Group Incorporated  (UNH - Free Report) and  HCA Healthcare, Inc. (HCA - Free Report) beat the respective Zacks Consensus Estimate.

Stock to Consider

Here is a stock worth considering from the medical sector with the perfect mix of elements to surpass estimates in the upcoming release:

Molina Healthcare, Inc (MOH - Free Report) has an Earnings ESP of +2.40% and a Zacks Rank #2 (Buy), currently. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.