What to watch from health care earnings

What to watch from health care earnings

When Anthem reports ahead of the bell Wednesday, analysts will be watching for its outlook on how tax reform will impact 2018 earnings.

Analysts at Cantor Fitzgerald raised their 2018 earnings estimate for the insurer from $13.00 per share to $16.00, based in part on the assumption that Anthem’s tax rate will fall from 35.5 percent to 28 percent, due to tax reform.

Whether they’ll use that extra cash to pursue a merger is likely to be one of the big questions for New CEO Gail Boudreaux.

“We see the company as having the budget and motivation to guild out a significant AI team both organilcally and through M&A [mergers and acquisitions],” analysts at Piper Jaffray wrote in a recent research note, estimating that Anthem has $5.5 billion in deployable capital, beyond tax savings.

It has been nearly eight months since Anthem terminated its deal to buy rival Cigna, which was blocked by regulators.

On Thursday, Cigna CEO David Cordani is likely to face questions about how mergers and acquisitions will figure in the firm’s plans to deploy tax reform savings.

Leerink analyst Ana Gupte said in a recent research note that Cigna executives aren’t likely to pursue acquiring their own pharmacy benefit manager. They also don’t seem anxious to do a deal, despite recent moves by competitors.

“Cigna is not looking at a deadline on capital deployment and is still actively contemplating its… strategic priorities,” Gupte wrote.

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