Anthem, Inc. (ANTM - Free Report) is poised for growth, riding on a healthy revenue stream, improving membership and a raised guidance.
After delivering impressive third-quarter results, the company has updated its outlook for 2019. It now expects its adjusted new income to be more than $19.40 per share, up from the earlier projection of $19.30. Medical membership is still estimated to be around 41 million. Operating revenues are predicted to be nearly $103 billion, above the earlier estimate of $102 billion.
The company flaunts a stellar earnings surprise history, having outpaced the Zacks Consensus Estimate in all the trailing four quarters, the average being 3.8%. This trend of consecutive estimate beats reflects the company’s operating efficiency.
Anthem is well-placed for growth, evident from its favorable VGM Score of A. Here V stands for Value, G for Growth and M for Momentum with the score being a weighted combination of all three factors.
Moreover, the company has been witnessing a healthy top line for the last several quarters, visible from its five-year CAGR of 4.88%. In the first nine months of 2019, the same rose 11.8% year over year on the back of premium rate increase and improved membership.
Rising number of members have always aided growth. The company’s strong Medicare and Medicaid business bodes well. Medical membership for the current year is now estimated to be around 41 million, indicating a 2.7% rise from the year-ago reported figure. We expect the same to climb on the back of partnerships and contract gains.
The company has been actively collaborating and acquiring companies to enhance its expansion process. Certain buyouts like that of America’s 1st Choice of South Carolina, Inc. and CVS Health helped the company upgrade its capabilities. Anthem will also be purchasing the Missouri and Nebraska Medicaid plans of WellCare Health. The move is related to the $17-billion worth pending merger of Centene and WellCare. With this deal, Anthem will win roughly 3,00,000 Medicaid members.
The company’s impressive capital position has allowed it to pay out dividends and repurchase shares. Anthem initiated cash dividends in early 2011 and has raised its dividend by about 200% from 2011 to 2018. It has also been aggressively engaged in share buybacks, utilizing its excess capital to add shareholder value.
However, the company has been incurring high costs over the last few years due to benefit expense as well as selling, general and administrative (SG&A) costs. Increasing level of expenses weighs on the bottom line.
Shares of this Zacks Rank #3 (Hold) company have inched up 1.9% in a year’s time, underperforming its industry’s growth of 2.4%.
Stocks to Consider
Investors interested in the medical sector might consider some better-ranked stocks like Select Medical Holdings Corporation (SEM - Free Report) , WellCare Health Plans, Inc and Genesis Healthcare, Inc .
Select Medical operates critical illness recovery hospitals, rehabilitation hospitals, outpatient rehabilitation clinics and occupational health centers. For the trailing four quarters, the company has an earnings beat of 11.1%, on average. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
WellCare Health offers managed care services to government-sponsored health care programs. The company has a positive surprise of 17.3%, on average, for the preceding four quarters. It currently carries a Zacks Rank #2 (Buy).
Genesis Healthcare operates skilled nursing facilities and assisted living centers. For the last four quarters, the company has an earnings beat of 80.9%, on average. It presently flaunts a Zacks Rank of 1.
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