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4 Solid Reasons to Retain Anthem (ANTM) in Your Portfolio

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Estimates for Anthem, Inc. (ANTM - Free Report) have been revised upward over the past 30 days, reflecting analysts’ confidence in the stock. The stock has seen the Zacks Consensus Estimate for 2018 and 2019 earnings being raised 0.60% and 0.59%, respectively.

Anthem is poised to gain from a thriving health insurance industry. A strong U.S. economy has enabled the health insurance industry to stand in good stead. A record-low unemployment rate and a gradual wage increase bode well for this space. High employment and wage growth fuel demand for health insurance and various other health-related services provided by insurers.

 Anthem flaunts an impressive Value Style Score of A. It also sports a Zacks Rank #1 (Strong Buy). Our research shows that stocks with a Value Style Score of A or B when combined with a Zacks Rank of 1 or #2 (Buy) offer the best opportunities in the value investing space.

Shares of this Zacks Rank #3 (Hold) company have rallied 28.39% in the past year, underperforming its industry’s growth of 34.18%.

 

Now, let us focus on some important factors that make Anthem stock an investor favorite.

Raised 2018 Guidance: The company has lifted its 2018 guidance. It expects its adjusted net income per share to be more than $15.30, a 27% increase from the level in 2017 and up from the prior projection of more than $15. Medical membership of the company is estimated in the range of 40.1-40.3 million, up from the past prediction of 40-40.2 million. Operating revenues are anticipated in the $91-$92 billion band, higher than the earlier forecast of $90.5-$91.5 billion. Consolidated medical loss ratio is assumed to be 84.4% plus or minus 30 basis points, a 10-basis point improvement at the midpoint from the previous outlook.

Increasing Membership: The company has successfully grown its membership base, backed by solid acquisition strategies, rollouts of health insurance exchanges and national accounts in the commercial segment as well as Medicaid expansion in the government segment. Although in the first quarter of 2018, the medical enrollment dropped by new account wins in national and local group businesses. The company hopes to increase its membership base during the remaining months of 2018, banking on more investments.

Growing Net Investment Income: Due to low interest rates, the company has been suffering at length. But the metric grew 15% in 2016, 11.2% in 2017 and 10.6% during the first quarter of 2018 on a year-over-year basis. This upside was attributable to Anthem’s impressive business strategies.

Effective Capital Deployment: The company continued with its dividend payouts and share repurchases by dint of its strong capital and cash position. Initiated in 2011, the company has successfully hiked its dividend by around 160% over the past five years. During the first quarter of 2018, it further increased the dividend by 7.1%. The company also boasts aggressive share buybacks. In the first quarter, it bought back shares worth $395 million and had $6.8 billion of shares remaining under its repurchase authorization as of Mar 31, 2018.

Stocks to Consider

Investors interested in the medical-HMO industry might take a look at a few better-ranked stocks like WellCare Health Plans, Inc. (WCG - Free Report) , Triple-S Management Corporation (GTS - Free Report) and Humana Inc. (HUM - Free Report) .

WellCare provides managed care services for government-sponsored health care programs. The company sports a Zacks Rank #1 (Strong Buy) and managed to pull off an average four-quarter positive surprise of 51.70%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Triple-S Management and its subsidiaries provide a portfolio of managed care and related products in the commercial, Medicare and Medicaid markets in Puerto Rico, the United States. It carries a Zacks Rank #2 (Buy) and managed to come up with a whopping four-quarter earnings surprise of 260.65%.

Humana operates as a health and well-being company in the United States. It holds a Zacks Rank of 2 and delivered an average four-quarter beat of 6.16%.

 

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