Anthem (ANTM) Down 0.1% Since Last Earnings Report: Can It Rebound?

Zacks Equity Research
·5 min read

A month has gone by since the last earnings report for Anthem (ANTM). Shares have lost about 0.1% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Anthem due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Anthem Q4 Earnings Miss Estimates, Revenues Up Y/Y

Anthem delivered fourth-quarter 2020 earnings of $2.54 per share, which missed the Zacks Consensus Estimate by 1.2%. Further, the bottom line plunged 34.5% year over year due to elevated costs.

Nevertheless, Anthem’s operating revenues of $31.5 billion outpaced the Zacks Consensus Estimate by 2.3%. Moreover, the top line improved 16.2% year over year owing to increased premium revenues attributable to the company’s strong Medicaid and Medicare businesses. Pharmacy product revenues stemming from the launch of IngenioRx and the return of the health insurance tax in 2020 have also contributed to the top-line growth.

Quarterly Operational Update

Anthem’s benefit expense ratio of 88.9% contracted 10 basis points (bps) from the prior-year quarter primarily driven by lower non-COVID healthcare utilization due to the pandemic. However, the decrease was partially offset by higher testing and treatment costs related to the pandemic.  

SG&A expense ratio of 13.7% expanded 80 bps from the year-ago quarter due to return of the health insurance tax in 2020 and higher spend while pursuing growth initiatives. Nevertheless, rise in operating revenues have partially benefited the metric.

Total expenses of the company increased 18.6% year over year to $31.2 billion due to higher benefit expense, cost of products sold, selling, general and administrative expenses, interest expense, and amortization of other intangible assets.

Segmental Results

Commercial & Specialty Business

Operating revenues of $9.2 billion in the fourth quarter were down 1.1% year over year.

The segment reported an operating gain of $123 million, which declined 76.7% year over year.

Operating margin was 1.3%, which contracted 430 bps from the year-ago quarter’s figure.

Government Business

Operating revenues were $18.8 billion, up 15.7% from the prior-year quarter.

Operating gain was $169 million, down 71.2% year over year due to expenses associated with the COVID-19 pandemic, drifting of pharmacy earnings to the IngenioRx segment and, higher spend to assist growth.

Operating margin was 0.9%, down 270 bps year over year.


While operating gain from the segment was $363 million in fourth-quarter 2020, operating margin for the same came in at 6.2%.


Operating revenues were $1.8 billion, which soared 190.4% from the prior-year quarter.

The Other segment’s operating loss of $50 million compared unfavorably with the year-earlier quarterly loss of $15 million.

Financial Update

As of Dec 31, 2020, Anthem’s cash and cash equivalents totaled $5.7 billion, up 16.3% from the level at 2019 end.

As of Dec 31, 2020, its long-term debt less current portion increased 8.7% to $19.3 billion from the level at 2019 end.

Operating cash outflow was $3.8 billion for fourth-quarter 2020.

Capital Deployment

During the fourth quarter, Anthem bought back shares worth $1.4 billion. As of Dec 31, 2020, the company had shares worth $1.1 billion remaining under its share buyback authorization.

Moreover, the company paid out a quarterly dividend of 95 cents per share, adding up to a distribution of cash worth $234 million.

The company announced a dividend of $1.13 per share on Jan 26, 2021 for first-quarter 2021, which represents a hike of nearly 19% from the prior payout. The new dividend will be payable on Mar 25, 2021 to its shareholders of record as of Mar 10.

Full-Year Update

For 2020, operating revenues totaled $120.8 billion, up 17.1% year over year. Full-year earnings per share was $22.48, which improved 15.6% year over year.

As of Dec 31, 2020, Medical enrollment increased 4.7% year over year to 42.9 million members. This upside was primarily driven by higher total risk enrollment, fee-based enrollment, Government Business enrollment and Commercial & Specialty Business enrollment.

Operating cash flow of the year surged 76.3% year over year to $10.7 billion. During 2020, the company repurchased shares worth $2.7 billion.

Guidance for 2021

Following the company’s fourth-quarter results, Anthem issued its outlook for 2021.

Adjusted net income for the current year is projected to be more than $24.50 per share.

Medical membership is forecasted in the range of 44.1 million to 44.7 million.

Operating revenues are anticipated around $135.1 billion encompassing premium revenues of $114.5-$115.5 billion.

Also, the company estimates operating cash flow of more than $5.7 billion.

The company predicts the benefit expense ratio at 88%, plus or minus 50 bps.

For the current year, investment income is expected to be $940 million.

Anthem envisions its SG&A ratio in the range of 10.8% plus or minus 50 bps.


How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month. The consensus estimate has shifted -12.68% due to these changes.

VGM Scores

Currently, Anthem has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.


Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Anthem has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.

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