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Category: Stock Market and Anthem Inc.
Date: 24 October 2019 Stock Price: $263.51 We take a look at the 3rd quarter earnings report of their 2019 fiscal year of Anthem Inc. a provider of health and medical aid plans that currently serves more than 78 million people.
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About Anthem Inc.
Anthem is a leading health benefits company dedicated to improving lives and communities, and making healthcare simpler. Through its affiliated companies, Anthem serves more than 78 million people, including over 40 million within its family of health plans. We aim to be the most innovative, valuable and inclusive partner.
- One in eight Americans receives coverage for their medical care through Anthem's affiliated plans.
- We offer a broad range of medical and specialty products.
Overview of Anthem's 3rd quarter 2019 earnings report
Data below refers to quarterly data unless specified otherwise:
- Total revenues: $26.647 billion (up from $23.251 billion for the same period of the previous year)
- Total revenues increased by 14.7% over the last 12 months
- Total expenses: $25.185 billion (up from $22.009 billion for the same period of the previous year)
- Total expenses increased by 14.4% over the last 12 months
- Net income: $1.183 billion (up from $960 million for the same period of the previous year)
- Diluted earnings per share: $4.55 (up from $3.62 for the same period of the previous year)
- PE ratio of Anthem Inc.: 14.45
- Diluted weighted-average shares outstanding: 260 million (down from 265.4 million for the same period of the previous year)
- Cash and cash equivalents: $4.190 billion
- Cash and cash equivalents per share: $16.11
- Cash and cash equivalents makes up 6.11% of Anthem's market capital
- Cash and cash equivalents makes up 5.38% of Anthem's total assets
- Premiums receivable: $4.782 billion
- Premiums receivable makes up 6.14% of Anthem's total assets
- Goodwill: $20.5 billion
- Goodwill per share: $78.84
- Goodwill makes up 29.9% of Anthem's total assets
- Stockholders equity in Anthem Inc.: $31.332 billion
- Stockholders equity per share in Anthem: $120.51
- So Anthem Inc. is trading at 2.18 times its stockholders equity per share which is within the expected range of between 2 and 4 most firms tend to trade at
- Cash generated from operations (for the 9 months): $4.743 billion
- Cash generated from operations per share (for the 9 months): $18.24
Anthem's management commentary on their 3rd quarter results and fiscal guidance
Indianapolis, Ind. – October 23, 2019 – Anthem, Inc. (NYSE: ANTM) today announced third quarter financial results driven by strong revenue growth and improved operational execution. "Anthem's third quarter results showed continued membership growth – together with strong operating revenue growth – giving us great momentum as we head into 2020," said Gail K. Boudreaux, President and CEO. "I am pleased with our success to date as we remain committed to delivering a simpler, more affordable and more personalized healthcare experience for those we serve."
Membership:
Medical enrollment totaled approximately 41.0 million members at September 30, 2019, an increase of 1.1 million, or 2.7 percent, from September 30, 2018. Total fully insured enrollment grew by 968 thousand lives, or 6.6 percent, and self-funded enrollment grew by 115 thousand lives, or 0.5 percent. Government Business enrollment increased by 864 thousand lives as the Company experienced growth in Medicaid and Medicare. Commercial & Specialty Business enrollment increased by 219 thousand lives driven by growth in the National and Individual businesses, partially offset by a decline in Local Group enrollment. Medical enrollment increased sequentially by 132 thousand lives during the third quarter of 2019, reflecting growth in Medicaid and Medicare, partially offset by declines in Commercial & Specialty Business enrollment.
Cash Dividend:
During the third quarter of 2019, the Company paid a quarterly dividend of $0.80 per share, representing a distribution of cash totaling $204 million. On October 22, 2019, the Audit Committee declared a fourth quarter 2019 dividend to shareholders of $0.80 per share. On an annualized basis, this equates to a dividend of $3.20 per share. The fourth quarter dividend is payable on December 20, 2019 to shareholders of record at the close of business on December 5, 2019.
Share Repurchase
Program: During the third quarter of 2019, the Company repurchased 2.4 million shares of its common stock for $644 million, or a weighted average price of $266.52. As of September 30, 2019, the Company had approximately $4.1 billion of Board-approved share repurchase authorization remaining
Full Year 2019:
• GAAP net income is now expected to be greater than $18.45 per share, including approximately $0.95 per share of net unfavorable items. Excluding these items, adjusted net income is now expected to be greater than $19.40*.
• Medical membership is now expected to be approximately 41.0 million. Fully-insured membership is now expected to be approximately 15.6 million and self-funded membership now is expected to be approximately 25.4 million.
• Operating revenue is now expected to be approximately $103.0 billion, including premium revenue of $94.0 billion - $95.0 billion.
• Benefit expense ratio is now expected to be in the range of 86.5% - 86.8%. • SG&A ratio is now expected to be in the range of 13.0% - 13.3%.
• Operating cash flow is now expected to be greater than $5.5 billion.
• Share count is now expected to be approximately 260 - 261 million
- Third quarter net income was $4.55 per share, including net negative adjustment items of $0.32 per share.
- Adjusted net income was $4.87* per share.
- Operating revenue increased $3.5 billion, or 15.1 percent, over the prior year quarter to $26.4 billion.
- Medical enrollment was 41.0 million members, an increase of 1.1 million members over the prior year quarter, driven by growth in the fully insured businesses.
- The Company now expects full year net income to be greater than $18.45 per share. Full year adjusted net income is now expected to be greater than $19.40* per share.
- Fourth quarter 2019 dividend of $0.80 per share declared to shareholders.
Membership:
Medical enrollment totaled approximately 41.0 million members at September 30, 2019, an increase of 1.1 million, or 2.7 percent, from September 30, 2018. Total fully insured enrollment grew by 968 thousand lives, or 6.6 percent, and self-funded enrollment grew by 115 thousand lives, or 0.5 percent. Government Business enrollment increased by 864 thousand lives as the Company experienced growth in Medicaid and Medicare. Commercial & Specialty Business enrollment increased by 219 thousand lives driven by growth in the National and Individual businesses, partially offset by a decline in Local Group enrollment. Medical enrollment increased sequentially by 132 thousand lives during the third quarter of 2019, reflecting growth in Medicaid and Medicare, partially offset by declines in Commercial & Specialty Business enrollment.
Cash Dividend:
During the third quarter of 2019, the Company paid a quarterly dividend of $0.80 per share, representing a distribution of cash totaling $204 million. On October 22, 2019, the Audit Committee declared a fourth quarter 2019 dividend to shareholders of $0.80 per share. On an annualized basis, this equates to a dividend of $3.20 per share. The fourth quarter dividend is payable on December 20, 2019 to shareholders of record at the close of business on December 5, 2019.
Share Repurchase
Program: During the third quarter of 2019, the Company repurchased 2.4 million shares of its common stock for $644 million, or a weighted average price of $266.52. As of September 30, 2019, the Company had approximately $4.1 billion of Board-approved share repurchase authorization remaining
Full Year 2019:
• GAAP net income is now expected to be greater than $18.45 per share, including approximately $0.95 per share of net unfavorable items. Excluding these items, adjusted net income is now expected to be greater than $19.40*.
• Medical membership is now expected to be approximately 41.0 million. Fully-insured membership is now expected to be approximately 15.6 million and self-funded membership now is expected to be approximately 25.4 million.
• Operating revenue is now expected to be approximately $103.0 billion, including premium revenue of $94.0 billion - $95.0 billion.
• Benefit expense ratio is now expected to be in the range of 86.5% - 86.8%. • SG&A ratio is now expected to be in the range of 13.0% - 13.3%.
• Operating cash flow is now expected to be greater than $5.5 billion.
• Share count is now expected to be approximately 260 - 261 million
Anthem Inc. (NYSE: ANTM) stock price history
The image below, obtained from Google, shows the stock price history of Anthem Inc. over the last 5 years. And it's been a very good time for Anthem Inc. stockholders. 5 years ago the stock was trading at around $115 a stock and its currently trading at $234.82 a stock. That's a return of 104.2% returned to Anthem Inc. stockholders over the last 5 years.
The stock of Anthem Inc. is trading at a lot closer to its 52 week low of $227.16 than it is to its 52 week high of $317.99 which to us is a clear indication that the momentum and sentiment of Anthem Inc. stock is negative at this point in time.
The stock of Anthem Inc. is trading at a lot closer to its 52 week low of $227.16 than it is to its 52 week high of $317.99 which to us is a clear indication that the momentum and sentiment of Anthem Inc. stock is negative at this point in time.
Recent coverage of Anthem Inc.
The extract below discusses the latest regarding Anthem as obtained from Zackscom
Healthcare insurance major Anthem (ANTM - Free Report) , on the other hand, has surpassed expectations in its Q3 earnings report, with $4.87 per share beating estimates by 3 cents on $26.44 billion in revenues that outperformed consensus by 4%. These also mark significant improvements from the year-ago quarter’s $3.81 per share and $22.98 billion, respectively. However, shares are selling off 2.4% in the pre-market today.
Read the full article here
Healthcare insurance major Anthem (ANTM - Free Report) , on the other hand, has surpassed expectations in its Q3 earnings report, with $4.87 per share beating estimates by 3 cents on $26.44 billion in revenues that outperformed consensus by 4%. These also mark significant improvements from the year-ago quarter’s $3.81 per share and $22.98 billion, respectively. However, shares are selling off 2.4% in the pre-market today.
Read the full article here
Anthem Inc. (NYSE: ANTM) latest stock valuation
So what is Anthem Inc. stock worth based on the release of their latest earnings report and their outlook for the rest of their 2019 fiscal year? Based on Anthem Inc. latest earnings report and their outlook our valuation models provide a target (full value) price for Anthem Inc. stock at $297.90 a stock. We therefore believe that the stock of Anthem Inc. is undervalued.
We usually suggest that long term and fundamental investors get in at least 10% below our target (full value) price which in this case is $297.90 Therefore we believe a good entry point into Anthem Inc. stock is at $268.10 or below. And since Anthem Inc. is trading at well below our suggested entry point into the stock we rate Anthem Inc. stock as a buy.
We expect the stock price of Anthem to tick upwards in coming weeks and months to levels closer to our target (full value) price.
We usually suggest that long term and fundamental investors get in at least 10% below our target (full value) price which in this case is $297.90 Therefore we believe a good entry point into Anthem Inc. stock is at $268.10 or below. And since Anthem Inc. is trading at well below our suggested entry point into the stock we rate Anthem Inc. stock as a buy.
We expect the stock price of Anthem to tick upwards in coming weeks and months to levels closer to our target (full value) price.
Next earnings release date for Anthem Inc.
It is expected that Anthem Inc. (NYSE: ANTM) 4th quarter 2019 earnings report will be released in late January 2020