Anthem's (ANTM) Q3 Earnings Beat Estimates, Improve Y/Y
Anthem Inc. ANTM delivered third-quarter 2019 earnings of $4.87 per share, marginally beating the Zacks Consensus Estimate by 0.6%.
Additionally, the bottom line improved 27.8% year over year on the back of higher revenues.
Further, Anthem reported operating revenues of $26.4 billion, beating the Zacks Consensus Estimate by 4.1%. Moreover, the top line was up 15.1% year over year, aided by membership growth across businesses, growth in value-added services and the premium rate increases to cover the overall cost trends. However, this upside was partially offset by the year-long waiver of the health insurance tax in 2019.
Quarterly Operational Update
Medical enrollment inched up 2.7% year over year to 41 million members, backed by growth in Medicaid and Medicare, partly offset by the declines in Commercial & Specialty Business enrollment.
Anthem’s benefit expense ratio of 87.2% expanded 240 basis points (bps) from the prior-year quarter. This increase was attributable to one-year waiver of the health insurance tax in 2019.
SG&A expense ratio of 12.9% contracted 250 bps from the year-ago quarter owing to the year-long waiver of the health insurance tax in 2019 plus growth in the operating revenues.
Anthem, Inc. Price, Consensus and EPS Surprise
Strong Segmental Results
Commercial & Specialty Business
Operating revenues were $9.2 billion in the second quarter, up 3.9% year over year.
Operating gain totaled $930 million, up 11.5% million year over year. This increase is driven by more penetration of value-added services, such as pharmacy and integrated health offerings. However, the same was partly offset by unfavorable reserve development.
Operating margin was 10%, up 70 basis points (bps) year over year.
Operating revenues were $16 billion, up 14.1% from the prior-year quarter.
Operating gain was $616 million, up 35.1% year over year, driven by better medical cost performance in Medicaid. However, the same was offset by one-year waiver of the health insurance tax to some extent.
Operating margin was 3.9%, up 60 bps year over year.
The Other segment’s operating loss of $18 million is narrower than the year-earlier quarterly loss of $41 million.
As of Sep 30, 2019, Anthem’s cash and cash equivalents summed $4.2 billion, up 6.5% from 2018 end.
As of Sep 30, 2019, its long-term debt less current portion increased 9.3% to $18.8 billion from the level at 2018 end.
Operating cash flow at the end of the first nine months of 2019 was $4.7 billion, up 40.7% year over year.
During the third quarter, Anthem bought back shares worth $644 million. As of Sep 30, 2019, the company had shares worth around $4.1 billion remaining under its share buyback authorization.
Moreover, the company paid out a quarterly dividend of 80 cents per share, adding up to a cash distribution worth $204 million.
The company announced a fourth-quarter dividend of 80 cents per share on Oct 22, 2019, payable Dec 20 to shareholders of record on Dec 5, 2019.
Revised Guidance for 2019
Based on solid third-quarter results, Anthem has updated its outlook for 2019.
The company’s adjusted net income is now expected to be higher than $19.40 per share, up from the prior projection of $19.30.
Medical membership is estimated to be around 41 million.
Operating revenues are predicted to be around $103 billion, up from the earlier estimate of $102 billion. This includes premium revenues of $94-$95 billion.
Operating cash flow is now anticipated to be higher than $5.5 billion.
SG&A ratio is forecast in the band of 13-13.3%, lower than the earlier outlook of 13.2-13.5%.
The company estimates the benefit expense ratio to be 86.5-86.8%, up from the range of 86.2-86.5%.
Anthem carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Upcoming Releases From Medical Sector
Some better-ranked stocks from the medical sector are as follows:
Molina Healthcare, Inc MOH is set to report third-quarter 2019 earnings performance on Oct 29. The stock has a Zacks Rank of 3 and an Earnings ESP of +0.92%.
MEDNAX, Inc MD is set to report third-quarter 2019 earnings on Nov 1. The stock has an Earnings ESP of +1.10% and is Zacks #3 Ranked. You can see the complete list of today’s Zacks #1 Rank stocks here.
AmerisourceBergen Corporation ABC has an Earnings ESP of +0.55% and is a #3 Ranked stock. The company is set to report third-quarter earnings on Nov 7.
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