Leerink Partners Raises Price Target on Anthem (ANTM) to $160 Following 3Q EPS Miss

November 3, 2016 7:16 AM EDT
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Price: $145.88 -0.5%

Rating Summary:
    7 Buy, 4 Hold, 0 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 21 | Down: 36 | New: 11
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Leerink Partners reiterated an Outperform rating on Anthem (NYSE: ANTM), and raised the price target to $160.00 (from $155.00), following the company's 3Q earnings report. ANTM reported a 2c miss vs. consensus, with EPS coming in at $2.45 on a revenue beat. The miss was driven mostly by SG&A and to a much lesser extent on a Consolidated MLR miss.

Analyst Ana Gupte commented, "We are more positive on ANTM (OP) and see it as a very interesting buying opportunity after a better than feared 3Q. The quarter offered a number of positives, in our view. First, the miss was from SG&A and worse than expected startup losses in the Iowa Managed Medicaid contract with margin normalization expected for 2017. Secondly, the Individual Exchange book of business showed a modest sequential improvement and margins are expected to improve from midsingle-digit negative to modestly positive in 2017. Third, Commercial medical cost trend remains moderate with guidance reiterated at 7% +/- 50 bps. Fourth, membership continues to grow with Local Fully insured and Medicaid, and guidance was raised on this dimension. Quality of the quarter was decent with sequentially stable claims payable and a CFO to NI of 1.6. With the exception of Medicaid expansion where the company sees continued rate pressure, and Small Group where ANTM will see margin compression to retain ACA non-compliant membership, we expect less than feared downside into 2017. We are raising our 2017E EPS of $11.50 to $11.55 (consensus at $11.58) with greater conviction in achievability. For 2018E we are modeling $13.00, with management pointing to the likely downward revision from the $14 previous, given weaker than expected growth in the ObamaCare Individual marketplaces. We raise our PT from $155 to $160, which represents a ~12.3x P/E on our 2018E EPS."

For an analyst ratings summary and ratings history on Anthem click here. For more ratings news on Anthem click here.

Shares of Anthem closed at $122.99 yesterday.



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