We issued an updated research report on Anthem, Inc. ANTM on Oct 9, 2015.
Anthem is scheduled to report third-quarter results on Oct 28, 2015. The Zacks Consensus Estimate is pegged at $2.33 per share, which represents a year-over-year decline of 1.4%.
Nevertheless, Anthem's successful divestitures, prudent capital management, modest cash position, strategic acquisitions and ACO arrangements are impressive. The company has finalized its acquisition of Cigna Corp. CI. The adjusted EPS accretion for the first year is projected to be greater than 10%, which is expected to double in the second year.
Successful acquisitions, rollouts of health insurance exchanges and national accounts in the commercial segment as well as Medicaid expansion in the government segment are helping the company in enhancing its membership base. The trend is expected to continue through 2015. Moreover, success in the Administrative Services Only (ASO) marketplace is impressive.
Also, being a dominant player in all Blue Cross Blue Shield ("BCBS") state markets, the company can access the provider networks of any other BCBS plan across the U.S. Additionally, the BlueCard program, which is provided to customers of BCBS plans not associated with Anthem, is boosting membership and is a solid source of revenues. Further, the company’s strong financial position enables it to engage in capital deployments, thereby boosting investor confidence.
However, implementation of the initial and phased-in provisions of the Health Care Reform is expected to weigh on the company’s financials. Also, imposition of the mandatory Health Insurance Provider (HIP) Fee on health insurers is increasing Anthem’s general and administrative expenses and is expected to do so through 2018.
Moreover, increased debt burden and competitive pressures might be detrimental to the company’s business opportunities and have an adverse impact on its financials, going ahead.
Anthem currently carries a Zacks Rank #3 (Hold). A couple of better-ranked stocks from the health care services space are Aetna, Inc. AET and Centene Corp. CNC. Both the stocks hold a Zacks Rank #2 (Buy).
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