Anthem Inc. ANTM will release fourth-quarter 2017 results on Jan 31, before the market opens. Last quarter, the company delivered a positive earnings surprise of 10%. Let’s see how things are shaping up for this announcement.
Why a Likely Positive Surprise?
Our proven model shows that Anthem has the right combination of two key ingredients to beat estimates this quarter.
Zacks ESP:Anthem has an Earnings ESP of +1.29%, representing the difference between the Most Accurate estimate and the Zacks Consensus Estimate. This is because the Most Accurate estimate of $1.26 is pegged higher than the Zacks Consensus Estimate of $1.25. The positive ESP indicates a likely earnings surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Anthem, Inc. Price and EPS Surprise
Zacks Rank: Anthem carries a Zacks Rank #2 (Buy). Notably, stocks with a favorable Zacks Rank #1 (Strong Buy), 2 or 3 (Hold) have a significantly higher chance of an earnings beat.
Conversely, the Sell-rated stocks (#4 or 5) should never be considered going into an earnings announcement, especially when the company is seeing negative estimate revisions.
Q4 Expectations
Anthem’s top line has witnessed a consistent growth over the past many quarters, driven by a rise in membership. The company’s fully insured and self-funded memberships have boosted the total enrollment. The Zacks Consensus Estimate for fourth-quarter revenues is currently pegged at $22.1 billion, reflecting year-over-year growth of nearly 3%.
Obamacare’s Medicaid expansion has also significantly boosted the company’s medical enrollment. For the fourth quarter, the Zacks Consensus Estimate for Medical enrollment is pegged at 40.1 million, up 0.5% year over year.
The company’s Government business has also been performing well over past many years, helped by rising Medicaid and medicare enrollment. The consensus estimate for total operating revenues of Government business is $11.8 billion, up 1% year over year.
Operating revenues of its Commercial business have also remained impressive over the years. The Zacks Consensus Estimate for total operating revenues from Commercial business is $10.1 billion, up 5.2% year over year.
However, higher medical costs for individual ACA-compliant products and higher claims leading to higher benefit expense ratio from its Medicaid business are expected to drain the bottom line.
The company is also likely to have witnessed higher administrative costs in the fourth quarter, continuing the previous trend.
The Individual business is also expected to have underperformed in the quarter, weighing on the overall results.
Other Stocks to Consider
Here are some other companies from the medical sector that you may want to consider as these too have the right combination of elements to beat on earnings this quarter:
Centene Corp. CNC has an Earnings ESP of +1.24% and a Zacks Rank of 2. The company is set to report earnings on Feb 6. You can see the complete list of today’s Zacks #1 Rank stocks here.
Aetna, Inc. AET is set to report earnings results on Jan 30 with an Earnings ESP of +0.27% and a Zacks Rank #3.
WellCare Health Plans, Inc. WCG has an Earnings ESP of +7.49% and a Zacks Rank of 3. The company is set to report fourth-quarter earnings on Feb 6.
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