We issued an updated research report on Anthem, Inc. ANTM on Jan 7, 2016.
Anthem has been strengthening its portfolio and increasing its membership base through acquisitions. The company is slated to acquire Cigna Corp. CI. This should boost Anthem’s earnings and generate significant cost synergies. Apart from acquisitions, Anthem forms alliances with various companies for its health insurance business expansion.
Anthem has also been succeeding in the Administrative Services Only (ASO) marketplace. Increase in the Local Group sales and conversion of fully insured contracts to self-funded ASO contracts, along with BlueCard and National Accounts membership growth is working in favor of increasing self-funded membership. Another positive is its independent license for marketing products under Blue Cross Blue Shield Association (BCBSA), the most recognized brand in the industry that enhances earnings growth further. Moreover, Anthem’s strong capital and cash position enable consistent dividend payouts and stock repurchases.
However, amid all the positives, Anthem’s debt burden is a drag. Additionally, Anthem faces competitive threats from its peers having greater market share, superior financial resources, higher ratings and stronger brand recognition. This might limit the company’s business opportunities and have an adverse impact on the company’s financials going forward.
Additionally, the Health Insurance Provider (HIP) fee along with other provisions, such as establishment of the minimum medical loss ratios, ban on annual and lifetime coverage caps, restriction on charging higher premiums from people with pre-existing medical conditions and excise tax on high premium insurance policies should push up the company’s expenses further and weigh on margin expansion.
Anthem is expected to report fourth-quarter 2015 earnings in the last week of January 2016. The Zacks Consensus Estimate for the same is pegged at $1.26 per share, representing a year-over-year decline of 27.46%.
Anthem currently carries a Zacks Rank #3 (Hold). A couple of better-ranked stocks in the health care services space are Magellan Health, Inc. MGLN, and UnitedHealth Group Incorporated UNH. Both stocks sport a Zacks Rank #1 (Strong Buy).
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