Anthem shares recover after Q4 earnings report; new CEO offers peek at growth strategy

anthem
Anthem's adjusted earnings per share in the fourth quarter, $1.29, beat the consensus Wall Street estimate of $1.27. (Matthew Hurst / CC BY-SA 2.0 / https://www.flickr.com/photos/skewgee/2463077387)

Anthem—which saw its stock tank on Tuesday following the news that Amazon was entering the healthcare sector—sent its shares spiraling upward one day later by issuing a strong quarterly earnings report.

The company said its net income rose to $1.23 billion, or $4.67 per share, in the fourth quarter, up from $368.4 million, or $1.37 per share, at the same time in 2016. Its adjusted earnings per share, $1.29, beat the consensus Wall Street estimate of $1.27.

Anthem said it now expects its 2018 adjusted net income to be greater than $15 per share—higher than the $14.07 analysts had predicted. That outlook includes a $2 per share benefit from the newly lowered corporate tax rate.

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Newly installed Anthem CEO Gail Boudreaux—who took over for Joseph Swedish in November—said on an earnings call Tuesday that “tax reform has allowed us to accelerate our investment spending and growth initiatives.”

Some of those investments will take the form of new technology capabilities, including external-facing apps and portals that make it easier for consumers and providers to do business with Anthem, she said.

Boudreaux also indicated that Anthem is bullish on growth opportunities in its government business lines. For one, the company is entering new managed care markets by partnering with local Blue Cross Blue Shield companies to improve care for Medicaid and dual-eligible beneficiaries.

Boudreaux also plans to focus on increasing Anthem’s presence in the Medicare Advantage market, where the company has historically lagged. “We are working to capture more of our fair share of this market,” she said.

One way Anthem is accomplishing that is through the acquisition of two Florida-based MA insurers: America’s 1st Choice and HealthSun. The former deal is still pending, but expected to close this quarter, and the latter transaction has already closed.

Regarding Anthem’s plans to partner with CVS and create an in-house pharmacy benefits manager, IngenioRx, Boudreaux said the company is moving full steam ahead “We feel that things are progressing very well, and we feel very confident about this,” she said.

However, the new and vaguely defined healthcare venture that Amazon, JPMorgan and Berkshire Hathaway are planning could prove problematic for Anthem’s PBM in the long term, as some analysts think the companies are aiming to disrupt the pharmacy supply chain.

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