It has been about a month since the last earnings report for Anthem . Shares have lost about 0.9% 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 the most recent earnings report in order to get a better handle on the important catalysts.
Anthem Q2 Earnings Surpass Estimates, Improve Y/Y
Anthem delivered second-quarter 2020 earnings of $9.20 per share, which beat the Zacks Consensus Estimate by 4.9% on the back of Medicaid and Medicare businesses. Moreover, the bottom line jumped 98.3% year over year.
However, Anthem’s operating revenues of $29.2 billion missed the Zacks Consensus Estimate by 0.9%. But the top line was up 15.9% year over year, aided by pharmacy product revenues in relation to the launch of IngenioRx. The increase was further led by higher premium revenues from growth in Medicaid and Medicare and the return of the health insurance tax in 2020.
Quarterly Operational Update
Medical enrollment inched up 3.9% year over year to 42.5 million members, backed by growth in Medicaid, National and Medicare businesses.
Anthem’s benefit expense ratio of 77.9% contracted 880 basis points (bps) from the prior-year quarter, driven by the return of the health insurance tax in 2020 and the deferral of healthcare utilization amid COVID-19 pandemic.
SG&A expense ratio of 13.9% expanded 90 bps from the year-ago quarter due to the return of the health insurance tax in 2020 and an increased spend on growth initiatives.
Strong Segmental Results
Commercial & Specialty Business
Operating revenues of $8.8 billion in the second quarter were down 6.7% year over year.
Operating gain totaled $1.4 billion, up 39.6% year over year on the back of reduced healthcare benefit utilization during the COVID-19 pandemic.
Operating margin was 15.6%, expanding 520 bps year over year.
Government Business
Operating revenues were $17.2 billion, up 11% from the prior-year quarter.
Operating gain was $1.6 billion, up 237.1% year over year on the back of reduced healthcare benefit utilization during the COVID-19 pandemic.
Operating margin was 9.4%, up 630 bps year over year.
Other
The Other segment’s operating gain of $66 million came against the year-earlier quarterly loss of $30 million on the back of growth in the Diversified Business Group.
Financial Update
As of Jun 30, 2020, Anthem’s cash and cash equivalents totaled $6 billion, up 22.1% from the level at 2019 end.
As of Jun 30, 2020, its long-term debt less current portion increased 11.7% to $19.8 billion from the level at 2019 end.
Cash provided by operating activities at the end of the second quarter was $8 billion, up 161.7% year over year.
Capital Deployment
After considering the company’s solvency level, share buyback activity was resumed in late June.
During the second quarter, Anthem bought back shares worth $55 million.
As of Jun 30, 2020, the company had shares worth $3.2 billion remaining under its share buyback authorization.
Moreover, the company paid out a quarterly dividend of 95 cents per share, adding up to a distribution of cash worth $242 million.
The company announced a dividend of 95 cents per share on Jul 28, 2020 for the third quarter, payable Sep 25 to its shareholders of record as of Sep 10, 2020.
Guidance for 2020
Based on solid second-quarter results, Anthem updated its guidance for 2020. GAAP net income is expected to be greater than $20.91 per share including approximately $1.39 per share of net unfavorable items. The company’s adjusted net income is now expected to be higher than $22.30 per share excluding these items.
The company withdrew all other previously issued guidance for the current-year financial metrics due to the unprecedented uncertainty around the COVID-19 pandemic and its impact.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review. The consensus estimate has shifted -6.24% due to these changes.
VGM Scores
At this time, Anthem has a great Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Charting a somewhat similar path, 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 A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward 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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Why Is Anthem (ANTM) Down 0.9% Since Last Earnings Report?
It has been about a month since the last earnings report for Anthem . Shares have lost about 0.9% 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 the most recent earnings report in order to get a better handle on the important catalysts.
Anthem Q2 Earnings Surpass Estimates, Improve Y/Y
Anthem delivered second-quarter 2020 earnings of $9.20 per share, which beat the Zacks Consensus Estimate by 4.9% on the back of Medicaid and Medicare businesses. Moreover, the bottom line jumped 98.3% year over year.
However, Anthem’s operating revenues of $29.2 billion missed the Zacks Consensus Estimate by 0.9%. But the top line was up 15.9% year over year, aided by pharmacy product revenues in relation to the launch of IngenioRx. The increase was further led by higher premium revenues from growth in Medicaid and Medicare and the return of the health insurance tax in 2020.
Quarterly Operational Update
Medical enrollment inched up 3.9% year over year to 42.5 million members, backed by growth in Medicaid, National and Medicare businesses.
Anthem’s benefit expense ratio of 77.9% contracted 880 basis points (bps) from the prior-year quarter, driven by the return of the health insurance tax in 2020 and the deferral of healthcare utilization amid COVID-19 pandemic.
SG&A expense ratio of 13.9% expanded 90 bps from the year-ago quarter due to the return of the health insurance tax in 2020 and an increased spend on growth initiatives.
Strong Segmental Results
Commercial & Specialty Business
Operating revenues of $8.8 billion in the second quarter were down 6.7% year over year.
Operating gain totaled $1.4 billion, up 39.6% year over year on the back of reduced healthcare benefit utilization during the COVID-19 pandemic.
Operating margin was 15.6%, expanding 520 bps year over year.
Government Business
Operating revenues were $17.2 billion, up 11% from the prior-year quarter.
Operating gain was $1.6 billion, up 237.1% year over year on the back of reduced healthcare benefit utilization during the COVID-19 pandemic.
Operating margin was 9.4%, up 630 bps year over year.
Other
The Other segment’s operating gain of $66 million came against the year-earlier quarterly loss of $30 million on the back of growth in the Diversified Business Group.
Financial Update
As of Jun 30, 2020, Anthem’s cash and cash equivalents totaled $6 billion, up 22.1% from the level at 2019 end.
As of Jun 30, 2020, its long-term debt less current portion increased 11.7% to $19.8 billion from the level at 2019 end.
Cash provided by operating activities at the end of the second quarter was $8 billion, up 161.7% year over year.
Capital Deployment
After considering the company’s solvency level, share buyback activity was resumed in late June.
During the second quarter, Anthem bought back shares worth $55 million.
As of Jun 30, 2020, the company had shares worth $3.2 billion remaining under its share buyback authorization.
Moreover, the company paid out a quarterly dividend of 95 cents per share, adding up to a distribution of cash worth $242 million.
The company announced a dividend of 95 cents per share on Jul 28, 2020 for the third quarter, payable Sep 25 to its shareholders of record as of Sep 10, 2020.
Guidance for 2020
Based on solid second-quarter results, Anthem updated its guidance for 2020. GAAP net income is expected to be greater than $20.91 per share including approximately $1.39 per share of net unfavorable items. The company’s adjusted net income is now expected to be higher than $22.30 per share excluding these items.
The company withdrew all other previously issued guidance for the current-year financial metrics due to the unprecedented uncertainty around the COVID-19 pandemic and its impact.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review. The consensus estimate has shifted -6.24% due to these changes.
VGM Scores
At this time, Anthem has a great Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Charting a somewhat similar path, 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 A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward 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.