Over the past 30 days, the stock has witnessed its 2020 and 2021 earnings estimates move 0.2% and 0.8% north, respectively.
It 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.
This leading health insurer updated its guidance for the full year post third-quarter 2020 results. Adjusted net income for the current year is projected to be more than $22.30 per share compared with $19.44 for 2019. A solid outlook should instill investor confidence in the stock.
The company’s top-line improvement remains impressive, witnessing a 4-year CAGR of 7.1% (2015-2019) on the back of a premium rate increase and higher membership. In the first nine months of 2020, its operating revenues of $77 billion were up 9.8% year over year, aided by pharmacy product revenues. We expect this solid top-line growth trend to continue, given the company’s strong business growth.
Anthem is now the fourth largest individual Medicare Advantage plan in the nation.
The company also witnessed a surge in its Telehealth visits, considering the current pandemic situation. Its live health online surpassed 1 million visits in early April. On its recent earnings call, management announced that growth in telemedicine is strong, especially for behavioral health services. We expect its telehealth medicine business to continue performing well on the back of rising demand.
Its series of tie-ups and buyouts shaped its inorganic growth story. Acquisitions helped the company boost its Medicare Advantage growth as well as add to its business portfolio. Anthem’s acquisitions of Missouri and Nebraska Medicaid plans of WellCare Health in January 2020 also added around 300000 Medicaid members under its coverage. The company’s Beacon Health buyout, the largest independently held behavioral health organization in the country, should further solidify its position in the space.
Anthem is steadily gaining traction from contract wins, which led to high membership. Medical enrollment rose 4% year over year to 42.6 million members in the first nine months of 2020, backed by robust organic growth, Government Business enrollment and strength in Commercial & Specialty Business.
The company constantly deploys capital on the back of its solid capital position. It initiated cash dividends in early 2011 and has raised its dividend consistently ever since. It is also actively engaged in share buybacks, utilizing its excess capital to boost its shareholder value. The company’s cash flow from operations remains encouraging. Despite the prevalent choppy economic scenario, share repurchase activity was resumed in late June, considering the company’s sturdy solvency position. This should buoy investors’ optimism on the stock.
However, Anthem persistently incurred escalated expenses over the last several quarters, which drained its bottom line.
The Zacks Consensus Estimate for 2020 and 2021 earnings is pegged at $22.44 and $25.44, indicating an upside of 15.4% and 13.4%, respectively from the year-ago reported figure.
Zacks Rank and Price Performance
Shares of this presently Zacks Rank #3 (Hold) company have gained 17% over the past six months, outperforming its industry‘s rally of 13.3%.
Other companies in the same space, such as Humana Inc. HUM, Molina Healthcare Inc. MOH and UnitedHealth Group Incorporated (UNH – Free Report) have also gained 4.2%, 15.8% and 16.7% in the same time frame. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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