Anthem (ANTM  ) reported better than expected Q1 earnings which exceeded analysts' estimates on the top and bottom line. The company also issued full-year guidance above expectations. Shares initially opened higher but finished in the red most likely due to the risk-off trading environment which hit stocks across the board.

The beat was fueled by lower-than-expected medical spending likely due to some lingering impact of the pandemic. Analysts have been expecting an increase in medical spending which was low during the pandemic due to fewer doctors' visits and procedures.

Anthem has been an outperformer with an 8% YTD gain and a 31% rally over the past year. Defensive stocks have been one of the few areas of the market that has outperformed which makes sense as their revenues are less affected by a recession or inflation. With inflation, they are able to capitalize as an intermediary in healthcare which features the highest inflation rates on a long-term basis. If the economy slows, they are less affected and benefit in one way with their large balance sheet due to lower rates.

Inside the Numbers

In Q1, Anthem earned $8.25 per share which exceeded analysts' estimates of $7.81 per share. This was a 10.1% improvement from last year. Revenue also came in higher than expected at $37.9 billion and was 19% higher than last year's Q1.

The biggest driver of its beat was its benefit to expense ratio coming in at 86.1% which was below expectations (and a more normal reading) of 87.8%, likely due to omicron's effect on reduced visits to doctors and procedures. This may also be one reason that investors chose to sell shares into the strength as this will likely be more of a headwind in the coming years.

For 2022, Anthem is forecasting $28.40 per share in earnings, a slight increase from its previous forecast of $28.25 per share. The company now expects an adjusted net income of over $28.40 per share, compared with its prior forecast of more than $28.25 per share.

The company was very positive on its earnings call and said that it was the "best national accounts selling season ever." It also noted increasing usage of its mobile app to make healthcare decisions. Overall, the company's enrollment grew by 7.5% from 43.5 million to 46.8 million.

Anthem looks like the ideal stock for the current market environment. Yet, it still offers upside in terms of growth which should remain in the double-digits over the next couple of years. Further, it's quite cheap with a P/E of 15.