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Centene (CNC) Down 8.3% Since Last Earnings Report: Can It Rebound?
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A month has gone by since the last earnings report for Centene (CNC - Free Report) . Shares have lost about 8.3% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Centene due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Centene Q4 Earnings Miss on High Costs, '23 Premium View Up
Centene Corporation reported fourth-quarter 2022 adjusted earnings per share (EPS) of 86 cents, which missed the Zacks Consensus Estimate by 1.2% but came higher than our estimate of 79 cents. The bottom line fell 14.9% year over year.
Revenues of Cetene improved 9% year over year to $35,561 million in the quarter under review. The top line lagged the consensus mark by a whisker but outpaced our estimate of $35,167.9 million.
The quarterly results were dampened by an elevated expense level that primarily resulted from increased medical costs. The inclusion of Magellan escalated selling, general and administrative (SG&A) costs for Centene. Nevertheless, membership growth within Medicaid and Medicare businesses partly offset the downside.
Quarterly Operational Update
Revenues from Medicare climbed 24% year over year in the fourth quarter, while Medicaid revenues advanced 8% year over year. However, commercial revenues dropped 4% year over year.
Premiums of Centene amounted to $31,884 million, which grew 10.4% year over year. The metric also came higher than the Zacks Consensus Estimate of $31,697 million and our estimate of $30,976.9 million. Service revenues advanced 3.7% year over year to $1,669 million in the quarter under review, which however, fell shy of the consensus mark of $1,736 million and our estimate of $2,039.7 million.
Centene’s total membership came in at 27.1 million as of Dec 31, 2022, which increased 4.8% year over year and matched our estimate. The growth came on the back of strength in Medicaid and Medicare businesses.
Health Benefits Ratio (HBR) deteriorated 80 basis points (bps) year over year to 88.7% in the fourth quarter. Increased Medicaid utilization, elevated flu costs and increased quality investments exerted pressure on the HBR.
Centene reported a net loss of $219 million in the quarter under review, against the prior-year quarter’s net earnings of $593 million.
Total operating expenses escalated 12.1% year over year to $35,843 million, higher than our estimate of $34,774.5 million.
Medical costs of $28,268 million increased 11.3% year over year, while SG&A expenses rose 18.8% year over year to $3,198 million.
Adjusted SG&A expense ratio of 9.3% deteriorated 60 bps year over year in the fourth quarter. The metric took a hit from the inclusion of Magellan, divestiture of PANTHERx and expenses linked with Medicare marketing as well as value creation investment.
Financial Update (as of Dec 31, 2022)
Centene exited the fourth quarter with cash and cash equivalents of $12,074 million, which slipped 8% from the figure in 2021 end. Total assets of $76.9 billion decreased 1.9% from the 2021-end level.
Long-term debt amounted to $17,938 million, which dropped 3.4% from the level as of Dec 31, 2021. The current portion of long-term debt was $82 million.
Total stockholders’ equity fell 10.2% from the 2021-end figure to $24,181 million.
During 2022, net operating cash flow surged 48.9% from the prior-year comparable period’s figure to $6,261 million.
Share Repurchase Update
Centene bought back 17 million shares worth $1.4 billion. As of Feb 7, 2023, Centene had a leftover share buyback capacity of $2.5 billion. Also, as of the same date, its senior note debt buyback program had an available capacity of $700 million.
2023 Guidance for Premium and Service Revenues Hiked
Premium and service revenues are currently anticipated to lie between $131.5 billion and $133.5 billion, higher than the prior guidance of $129.5-$131.5 billion. However, the mid-point of the revised outlook indicates a fall of 2.2% from the 2022 reported figure of $135.5 billion.
Other Projections for 2023
Management reiterates its guidance for the 2023 adjusted EPS outlook. The metric is estimated within $6.25-$6.40, the mid-point of which suggests 9.4% growth from the 2022 figure of $5.78.
Earlier, revenues were forecasted to lie between $137.4 billion and $139.4 billion, the midpoint of which indicates a 4.2% fall from the 2022 figure of $144.5 billion.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
VGM Scores
At this time, Centene has an average Growth Score of C, however its Momentum Score is doing a lot better with an A. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Centene has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Centene (CNC) Down 8.3% Since Last Earnings Report: Can It Rebound?
A month has gone by since the last earnings report for Centene (CNC - Free Report) . Shares have lost about 8.3% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Centene due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Centene Q4 Earnings Miss on High Costs, '23 Premium View Up
Centene Corporation reported fourth-quarter 2022 adjusted earnings per share (EPS) of 86 cents, which missed the Zacks Consensus Estimate by 1.2% but came higher than our estimate of 79 cents. The bottom line fell 14.9% year over year.
Revenues of Cetene improved 9% year over year to $35,561 million in the quarter under review. The top line lagged the consensus mark by a whisker but outpaced our estimate of $35,167.9 million.
The quarterly results were dampened by an elevated expense level that primarily resulted from increased medical costs. The inclusion of Magellan escalated selling, general and administrative (SG&A) costs for Centene. Nevertheless, membership growth within Medicaid and Medicare businesses partly offset the downside.
Quarterly Operational Update
Revenues from Medicare climbed 24% year over year in the fourth quarter, while Medicaid revenues advanced 8% year over year. However, commercial revenues dropped 4% year over year.
Premiums of Centene amounted to $31,884 million, which grew 10.4% year over year. The metric also came higher than the Zacks Consensus Estimate of $31,697 million and our estimate of $30,976.9 million. Service revenues advanced 3.7% year over year to $1,669 million in the quarter under review, which however, fell shy of the consensus mark of $1,736 million and our estimate of $2,039.7 million.
Centene’s total membership came in at 27.1 million as of Dec 31, 2022, which increased 4.8% year over year and matched our estimate. The growth came on the back of strength in Medicaid and Medicare businesses.
Health Benefits Ratio (HBR) deteriorated 80 basis points (bps) year over year to 88.7% in the fourth quarter. Increased Medicaid utilization, elevated flu costs and increased quality investments exerted pressure on the HBR.
Centene reported a net loss of $219 million in the quarter under review, against the prior-year quarter’s net earnings of $593 million.
Total operating expenses escalated 12.1% year over year to $35,843 million, higher than our estimate of $34,774.5 million.
Medical costs of $28,268 million increased 11.3% year over year, while SG&A expenses rose 18.8% year over year to $3,198 million.
Adjusted SG&A expense ratio of 9.3% deteriorated 60 bps year over year in the fourth quarter. The metric took a hit from the inclusion of Magellan, divestiture of PANTHERx and expenses linked with Medicare marketing as well as value creation investment.
Financial Update (as of Dec 31, 2022)
Centene exited the fourth quarter with cash and cash equivalents of $12,074 million, which slipped 8% from the figure in 2021 end. Total assets of $76.9 billion decreased 1.9% from the 2021-end level.
Long-term debt amounted to $17,938 million, which dropped 3.4% from the level as of Dec 31, 2021. The current portion of long-term debt was $82 million.
Total stockholders’ equity fell 10.2% from the 2021-end figure to $24,181 million.
During 2022, net operating cash flow surged 48.9% from the prior-year comparable period’s figure to $6,261 million.
Share Repurchase Update
Centene bought back 17 million shares worth $1.4 billion. As of Feb 7, 2023, Centene had a leftover share buyback capacity of $2.5 billion. Also, as of the same date, its senior note debt buyback program had an available capacity of $700 million.
2023 Guidance for Premium and Service Revenues Hiked
Premium and service revenues are currently anticipated to lie between $131.5 billion and $133.5 billion, higher than the prior guidance of $129.5-$131.5 billion. However, the mid-point of the revised outlook indicates a fall of 2.2% from the 2022 reported figure of $135.5 billion.
Other Projections for 2023
Management reiterates its guidance for the 2023 adjusted EPS outlook. The metric is estimated within $6.25-$6.40, the mid-point of which suggests 9.4% growth from the 2022 figure of $5.78.
Earlier, revenues were forecasted to lie between $137.4 billion and $139.4 billion, the midpoint of which indicates a 4.2% fall from the 2022 figure of $144.5 billion.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
VGM Scores
At this time, Centene has an average Growth Score of C, however its Momentum Score is doing a lot better with an A. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Centene has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.