Why Should You Hold onto Anthem (ANTM) in Your Portfolio?

Anthem, Inc.  ANTM have been in investors’ good books owing to its healthy revenue stream…

Anthem, Inc.  ANTM have been in investors’ good books owing to its healthy revenue stream and strategic measures. This leading health insurer also boasts an expanded product portfolio.

Over the past seven days, the stock has witnessed its 2021 earnings estimate move 0.03% north.

The company is well-poised for progress, evident from its  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.

Now delve deeper to see what makes it an investor favorite stock.

This presently Zacks Rank #3 (Hold) insurer’s second-quarter earnings beat estimates, driven by improved revenues.  Solid Medicaid and Medicare businesses also contributed to this upside.

The company has always witnessed growth on the back of buyouts. The acquisitions of Missouri and Nebraska Medicaid plans of WellCare Health in January 2020 also added around 300000 Medicaid members under its coverage. Its Beacon Health’s buyout, the largest independently held behavioral health organization in the country, should strengthen its position in the space. Anthem also purchased AmeriBen, which helped it increase commercial and specialty business enrollment.

The insurer company completed the takeover of Puerto Rico-based subsidiaries including MMM Holdings from InnovaCare Health, L.P. All these initiatives bode well.

In the second quarter of 2021, Anthem bought myNEXUS, Inc., a home-based nursing management company for payors. The buyout is expected to provide better in-home healthcare facilities, which in turn, will lead to better health outcomes for individuals.

Following the release of second-quarter results, the company revised its guidance for the year. Adjusted net income for the current year is projected to be more than $25.50 per share, higher than the previous estimate of above $25.10. It is on track to achieve a long-term annual adjusted EPS growth target of 12-15%.

Medical membership is anticipated to be 44.8-45.3 million, higher than the prior guidance of 44.1-44.7 million. The midpoint of the new guidance indicates an upside of 5% from the 2020 reported figure. Operating revenues are anticipated at $137.1 billion encompassing premium revenues of $116.5-$117.5 billion. The newly-provided guided range not only remains higher than the previous projection of $135.1 billion but also its midpoint implies an upside of 13.5% from the 2020 reported figure.

For the current year, investment income is forecast to be $1.1 billion (comparing favorably with the previous guidance of $970 million), indicating growth of 22.2% from the 2020 reported figure.

The health insurer witnessed growing revenues, which is evident from its 2015-2020 CAGR of 9%. The top line is steadily improving on the back of a premium rate increase and higher membership. In the first half of 2021, revenues of $65.4 billion improved 11.5% year over year owing to increased premium revenues, attributable to the company’s strong Medicaid and Medicare businesses.

The company’s growing membership is also impressive. In 2020, medical enrollment rose 4.7% year over year to 42.9 million members, backed by robust organic growth. As of Jun 30, 2021, the same rose 4.4% year over year to 44.3 million members. For 2021, medical membership is predicted in the range of 44.8-45.3 million, the midpoint of which indicates an upside of 5% from the 2020 reported figure.

On the back of its generous cash flow, the company has been able to deploy capital for the past many years now. It initiated cash dividends in early 2011 and raised its dividend consistently.

Share buyback activity was resumed last June, considering the company’s solid solvency position. In the first half of 2021, Anthem repurchased shares worth $927 million. The company expects to buy back shares worth $1.6 billion for 2021 and around 60% of the target is already achieved.

The consensus mark for 2021 earnings stands at $25.61, indicating an upside of 13.92% from the year-ago reported figure.

Price Performance

Shares of this company have gained 34.1% in the past year, outperforming its industry’s growth of 28.7%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Other companies in the same space, such as The Joint Corp. JYNT, Molina Healthcare, Inc. MOH and UnitedHealth Group Incorporated  UNH have also surged 452.6%, 45.3% and 36%, respectively, in the same time frame.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.