Guidance for 2016
In its 1Q16 conference call, Anthem (ANTM) updated its 2016 revenue guidance to $81 billion–$82 billion, which is higher than the previously projected revenue range by about $1 billion. This increased projection for revenue is attributed to increased membership projections are in line with the enrollments witnessed in 1Q16.
Anthem expects to earn adjusted EPS (earnings per share) greater than $10.8 for 2016. This projection considers dynamics affecting the public exchange business as well as the expected drop in margins for the Medicaid business.
Wall Street analysts expect Anthem to earn revenues of about $81.4 billion in 2016 and $84.8 billion in 2017. Analysts have also projected that in 2016, UnitedHealth Group (UNH), Cigna (CI), and Aetna (AET) will earn revenues worth around $182 billion, $40.1 billion, and $62.5 billion, respectively.
Anthem expects fully insured membership to reach about 14.9 million at the end of 2016, which is higher by about 250,000 than that projected by the company in the 4Q15 earnings conference. This reflects the confidence of the company in its individual and Medicaid business. Additionally, Anthem also expects self-insured enrollments to be higher than what was previously projected by about 250,000 at the end of 2016.
The company has also estimated self-insured enrollments to be about 24.5 million in 2016. Based on these projections, Anthem expects that total commercial enrollments in 2016 will be higher on a YoY (year-over-year) basis by about 700,000–900,000.
Anthem expects that the medical care ratio at the end of 2016 will be in the range of 83.3%–83.9%. The SG&A (selling, general, and administration) ratio is also expected to be in the range of 15.2%–15.8%, mainly pressured by transactions costs incurred from the Cigna acquisition in 1Q16. Anthem projects its operating cash flows to be more than $3 billion in 2016.
If Anthem manages to realize its updated projections for 2016, it may boost the company’s share prices as well as those of the iShares S&P 500 Value ETF (IVE). Anthem makes up about 0.41% of IVE’s total portfolio holdings.
In the next and final part, we’ll discuss the forward PE multiples and analyst recommendations after Anthem’s 1Q16 earnings.