Zacks Investment Ideas Highlights: Anthem, UnitedHealth Group and Molina Healthcare

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Chicago, IL – December 29, 2021 – Today Zacks Investment Ideas presents: Anthem, Inc. ANTM, UnitedHealth Group, Inc. UNH and Molina Healthcare, Inc. MOH.

Neutralize the rise in health insurance premiums in 2022

It’s no secret that health insurance premiums have only changed in one direction over time. Over the past decade, family premiums for employer-sponsored coverage have jumped 47% according to the Kaiser Family Foundation’s 2021 Employer Health Benefits Survey. In the United States, approximately 155 million people depend on employer-sponsored coverage.

The rate of premium growth has exceeded both inflation (19%) and wages (31%) over the same period. According to the Kaiser report, having family health insurance at work now costs employers and employees an average of $ 22,221 per year. Workers have contributed an average of about $ 6,000 this year, with employers covering the rest.

The outlook becomes much worse when we factor in the health insurance premiums of non-employers. Since the Affordable Care Act (keyword “affordable”) was enacted in 2010, the average premium for family health insurance in the United States has more than tripled. While most contributions from non-employers are now subsidized by taxpayers, the rate of increase is quite alarming.

As an investor, sometimes it helps to think of yourself as a handyman or an entrepreneur. You have a set of tools to accomplish different jobs and you have to adapt to the needs of each specific project. In our current investment environment, health insurance premiums have skyrocketed – and we need to decipher the tools to use to best counter these higher costs.

The main beneficiaries of the rise in premiums have undoubtedly been health insurers. The actions of these insurers are the tools we can use to achieve our investment goal of neutralizing rising health care costs.

The iShares US Healthcare Providers IHF ETF seeks to track the investment results of an index composed of national equities from the healthcare provider sector. The IHF has climbed almost 25% this year and is currently reaching historic highs. New highs are a sign of strength and investors would be advised to take note of three companies in this ETF that are also reaching new highs. These companies are three of the top ten holdings of the IHF and represent around 35% of the total holdings of the IHF.

The iShares US Healthcare Providers ETF provides investors with exposure to companies that provide health insurance, diagnostics and specialist treatment. Below, we’ll take a look at the top three health insurers outperforming the market.

Anthem

Anthem operates as a national health benefits company, offering a range of networked health benefit plans to large and small groups, individuals, as well as the Medicaid and Medicare markets. ANTM also offers pharmacy, dental, vision, life and disability insurance benefits. Founded in 1944 and based in Indianapolis, IN, Anthem serves over 44 million medical members through its Affiliate Health Plans.

Anthem has significantly improved its revenue in recent years, with a 9% CAGR from 2015 to 2020 as a result of higher membership and premium rate increases. The company increased revenue 15% year-over-year in the first nine months of 2021 to $ 35.8 billion. Given ANTM’s strong Medicaid and Medicare business, we expect the revenue growth trend to continue into 2022.

Anthem’s strong cash position has resulted in consistent dividend payouts and share buybacks. In the third quarter of this year, ANTM repurchased shares worth $ 480 million. In total, the company plans to repurchase shares worth $ 1.6 billion in 2021, which should further support its share price.

ANTM represents more than 9% of the total IHF ETF holdings mentioned above. The company posted an average surprise profit of + 4.71% over the previous four quarters. ANTM recently reported EPS of $ 6.79 in October, a positive surprise of 6.93% from consensus. Corporate stocks have outperformed the market this year with a return of 46%.

Zacks’ consensus estimate for BPA 2021 is $ 25.96, which is a 15.48% increase from 2020. ANTM is expected to release its results on January 26.e.

UnitedHealth Group

UnitedHealth Group operates as a diversified healthcare company in the United States. The company offers a wide range of healthcare products and services, including Health Maintenance Organizations (HMOs), Preferred Provider Organizations (PPOs), as well as managed fee-for-service programs. Founded in 1977 and headquartered in Minnetonka, Minnesota, UNH offers a full range of health benefit programs to individuals, employers, the military, retirees, as well as Medicare and Medicaid beneficiaries.

UNH has the largest and most diverse membership base in the managed care market, giving the company a significant competitive advantage. The company has acquired a number of competing healthcare providers over the years and has also grown its prescription drug business through OptumRx through the acquisition of Catamaran in 2015.

UNH’s revenue has grown steadily, with the company registering a 5.1% CAGR in the five-year period ending 2020. In the first nine months of 2021, the strong position of the company in the market helped increase revenues by 11.6%. We expect this trend to continue in the years to come.

UNH represents almost 23% of the aforementioned IHF ETF holdings and has achieved top profits quarterly for the past eight consecutive years. The company posted an average surprise over the last four quarters of + 8.66%, supporting the stock’s 45.1% rise this year.

What the Zacks model reveals

The Zacks Earnings ESP (Expected Surprise Prediction) seeks to identify companies that have recently seen positive earnings estimate revision activity. This proprietary model has proven to be very useful in spotting positive earnings surprises in advance. In fact, by combining a Zacks # 3 or better ranking and a positive earnings ESP, stocks produced a positive surprise 70% of the time according to our 10-year backtest.

UnitedHealth Group is a Zacks # 3 (Hold) stock and has an ESP of + 0.33% gains. The positive trend of unexpected profits is expected to continue. Zacks’ consensus estimate for 2021 EPS is currently $ 18.85, which translates to an 11.67% growth from last year. The UNH is expected to report on January 19e.

Molina Health

Molina Healthcare provides managed health care services to families and low-income individuals through Medicare and Medicaid programs and through state insurance markets. Founded in 1980 and headquartered in Long Beach, California, MOH is a multi-state healthcare organization with approximately 4 million members.

In the first nine months of 2021, Molina Healthcare managed to grow its revenue by 43.5% compared to last year. Total revenues for 2021 are expected to rise to $ 27.5 billion on the heels of increased memberships and higher premiums.

The Department of Health has averaged a positive earnings surprise of 4% over the past four quarters. The company recently reported EPS of $ 2.83 in October, a surprise of 2.54% from estimates. MOH stock followed suit, climbing 51.28% over the year.

Zacks’ current consensus estimate for 2021 earnings is $ 13.37, a 25.3% increase from 2020. For next year, analysts forecast healthy EPS growth of 27. , 28% to $ 17.02. The Ministry of Health is expected to release its results on February 9e, 2022.

As health insurance premiums continue to rise, these three health insurers are poised to continue to outperform.

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UnitedHealth Group Incorporated (UNH): Free Stock Analysis Report

Molina Healthcare, Inc (MOH): Free Stock Analysis Report

Anthem, Inc. (ANTM): Free Stock Analysis Report

IShares US Healthcare Providers (IHF) ETF: ETF Research Reports

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