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Anthem (ANTM) Down 1.1% Since Last Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for Anthem (ANTM - Free Report) . Shares have lost about 1.1% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Anthem due for a breakout? 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 Q3 Earnings Beat Estimates, Increase Y/Y

Anthem delivered third-quarter 2021 earnings of $6.79 per share, which beat the Zacks Consensus Estimate of $6.35 by 6.9% owing to better revenues and solid Medicaid and Medicare businesses.

The bottom line also increased 61.7% year over year.

Quarterly Operational Update

Anthem’s benefit expense ratio of 87.7% expanded 90 basis points (bps) from the prior-year quarter’s figure.

The SG&A expense ratio of 11.1% contracted 620 bps from the year-ago quarter’s level on the back of repealing the health insurance tax in 2021, absence of charges related to business optimization and the BCBSA litigation settlement and better operating revenues.

Total expenses of the company increased 9.9% year over year to $33.8 billion due to higher benefit expense, cost of products sold and amortization of other intangible assets.

Segmental Results

Commercial & Specialty Business

Operating revenues of $9.8 billion in the third quarter were up 5.8% year over year.

The segment reported an operating gain of $620 million against the year-ago quarter’s loss of $234 million. This upside was on the back of BCBSA litigation settlement and business optimization charges.

Operating margin was 6.3% against the year-ago quarter’s figure of (2.5%).

Government Business

Operating revenues were $21.6 billion, up 19.7% from the prior-year quarter’s reading.

Operating gain was $967 million, up 293.1% year over year owing to the impact of negative rate adjustments in the Medicaid business during third-quarter 2020 in relation to COVID-19, BCBSA litigation settlement and business optimization charges plus membership growth in the Medicare and Medicaid businesses.

IngenioRx

Operating revenues from the segment were $6.5 million in third-quarter 2021, up 17.3% year over year. Operating gain in the segment rose 29% year over year on the back of growth in integrated medical and pharmacy membership.

Other

Operating revenues of $2.6 billion soared 48.5% from the prior-year quarter’s level.

The Other segment’s gain of $27 million compared favorably with the year-earlier quarterly loss of $156 million owing to business optimization charges taken in the third quarter of 2020 along with decrease in unallocated corporate expenses.

Financial Update (as of Sep 30 2021)

Anthem’s cash and cash equivalents totaled $5.4 billion, down 4.4% from the level at 2020 end.

The company’s long-term debt less current portion increased 12.5% to $21.7 billion from the level at 2020 end.

Cash provided by operating activities was $6.6 billion for the first nine months of 2021, down 2.7% year over year.

Capital Deployment

During the third quarter, Anthem bought back shares worth $450 million. As of Sep 30, 2021, the company had shares worth $4.7 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 $276 million.

The company announced a dividend of $1.13 per share on Oct 19, 2021 for third-quarter 2021. The new dividend will be payable Dec 21, 2021 to its shareholders of record as of Dec 3, 2021.

Guidance for 2021

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

Adjusted net income for the current year is projected to be more than $25.85 per share, higher than the prior estimate of more than $25.50.

The company anticipates its operating cash flow view of more than $6 billion, up from the previous expectation of $5.8 billion.

For the current year, investment income is expected to be $1.2 billion.

 

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month.

VGM Scores

At this time, Anthem has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Anthem has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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