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Anthem Posts Lower-than-Expected Earnings Per Share in 4Q15

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Jan. 29 2016, Updated 4:13 p.m. ET

Anthem’s 4Q15 takeaways

Anthem (ANTM) posted its 4Q15 and fiscal 2015 earnings on January 27, 2015. The company registered diluted EPS (earnings per share) attributable to common shareholders of about $1.1 in 4Q15 and diluted EPS of approximately $10.2 for fiscal 2015.

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Anthem’s diluted EPS fell short of estimates

As the above chart shows, Anthem’s diluted EPS in 4Q15 failed to match Wall Street analyst expectations by $0.04. Anthem recorded its lowest quarterly adjusted EPS in 4Q15, compared to other quarters in 2015. The subdued performance is mainly attributable to the company’s changing business mix as well as to increased medical and operating expenses. Anthem also earned lower-than-expected margins in its commercial and government business and witnessed a rise in total investment spending.

In 4Q15, Anthem earned $20.2 billion in revenues, which represents a rise of 6.3% on a YoY (year-over-year) basis. The company’s net profit margin declined by about 1.3% YoY, and Anthem’s revenues in fiscal 2015 came in at $79.2 billion, which represents a revenue growth of 7.2% YoY. The company also earned adjusted EPS of about $10.2 in fiscal 2015, which represents a Y0Y growth of 8.7%.

For fiscal 2015, UnitedHealth Group (UNH) earned revenues of about $157 billion, while health insurance peers Aetna (AET) and Cigna (CI) are expected to earn revenues of about $60.2 billion and $37.8 billion, respectively.

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Anthem’s subsequent stock price movement

After the release of its 4Q15 earnings results, Anthem’s share price declined by about 4.7% from $137.8 on January 26, 2016, to $131.2 on January 27, 2016. In addition to operating expenses, the company also witnessed a negative impact of $0.04 per share due to the dissolution of the cooperatives in Colorado.

The liquidation of the failed healthcare cooperatives’ assets was carried out by an insurance guaranty association. However, if any additional obligations remain, then they have to be borne by other health insurers in the market in proportion of their market share.

ETF exposure and what to expect from this series

Investors can invest in the SPDR S&P 500 ETF (SPY) and thereby reduce the excessive company-specific risks of investing directly in Anthem. Anthem accounts for about 0.21% of SPY’s total holdings.

In this series, we’ll thoroughly break down the implications of Anthem’s 4Q15 results according to enrollments, pharmaceutical sales and pricing, medical care ratios, analyst recommendations, and current valuation.

Continue to the next part for an analysis of Anthem’s commercial and specialty enrollments in 4Q15.

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