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Centene (CNC) Q2 Earnings Miss on Declining Medicaid Membership
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Centene Corporation (CNC - Free Report) reported second-quarter 2024 adjusted earnings per share (EPS) of $2.42, which missed the Zacks Consensus Estimate of $2.44. However, the bottom line improved 15.2% year over year.
Revenues rose 5.9% year over year to $39.8 billion. The top line beat the consensus mark by 9.1%.
The second-quarter earnings were affected by lower Medicaid revenues, service revenues, and higher operating expenses. Reduced membership in Medicaid and Medicare also impacted the earnings. However, Marketplace membership growth acted as a partially offset.
Centene Corporation Price, Consensus and EPS Surprise
Revenues from Medicaid amounted to $20.3 billion, which slipped 8% year over year in the quarter under review, while Medicare revenues rose 6% year over year to $6 billion. Additionally, commercial revenues of $8.5 billion climbed 49% year over year.
Premiums of Centene rose 4.2% year over year to $35.1 billion, higher than the Zacks Consensus Estimate of $33 billion. The improvement came on the back of a growing customer base in the Marketplace business as a result of solid product positioning and growth in the overall market, partly offset by a decline in Medicaid membership stemming from redeterminations.
Service revenues of $833 million dipped 26% year over year and missed the consensus mark of $839 million. Investment and other income rose 8.9% year over year to $463 million, higher than the consensus mark of $448 million.
As of Jun 30, 2024, total membership was 28.5 million, which increased marginally year over year and surpassed the Zacks Consensus Estimate of 27.7 million and our estimate of 27 million. Membership in the Commercial business witnessed a significant year-over-year increase in the second quarter, offsetting the decline in Medicaid and Medicare memberships.
The Health Benefits Ratio (HBR) of CNC deteriorated 60 basis points year over year to 87.6%. However, the metric declined slightly from our estimate of 87.9%.
Adjusted net earnings grew 11.1% year over year to $1.28 billion, higher than our estimate of $1 billion.
Total operating expenses of $38.6 billion increased 6% year over year in the quarter under review, higher than our estimate of $35.1 billion. The increase was due to elevated medical costs and premium tax expenses. The two expense components escalated 4.7% and 38.8%, respectively, on a year-over-year basis.
Adjusted SG&A expense ratio improved 60 basis points year over year to 8% due to marketplace risk adjustment revenues, ongoing expense reduction initiatives and divestiture of Circle Health, which operated at a high SG&A expense ratio.
Financial Update (as of Jun 30, 2024)
Centene exited the second quarter with cash and cash equivalents of $17.6 billion, which increased 2.3% from the 2023-end level. Total assets of $83.1 billion slipped 1.8% from the figure at 2023-end.
Long-term debt amounted to $17.5 billion, which declined 1.1% from the figure as of Dec 31, 2023. The current portion of long-term debt totaled $112 million.
Total stockholders’ equity of $27.4 billion increased 5.8% from the 2023-end figure.
Net cash provided by operating activities was $2.2 billion in the first six months against net cash generated from operations of $6.8 billion in the year-ago period.
Share Repurchase Update
Centene bought back common shares worth $800 million in the second quarter. A leftover capacity of $4.4 billion remained under the company’s share repurchase authorization as of Jul 26, 2024.
2024 Guidance Revised
Management anticipates premium and service revenues within $141-$143 billion, up from the prior guidance of $135.5-$138.5 billion. The midpoint of the updated outlook indicates growth of 1.4% from the 2023 reported figure.
Revenues are estimated to be between $155 billion and $157 billion in 2024, higher than the prior outlook of $147-$150.5 billion. The midpoint of the revised guidance suggests 1.3% growth from the 2023 figure.
Adjusted EPS is forecasted to be greater than $6.80, up from the earlier view of greater than $6.70. The figure reflects an increase of 1.8% from the 2023 figure. GAAP EPS is expected to remain greater than $5.94 in 2024.
HBR is estimated to be near the high end of the range of 87.3-87.9%. The company previously anticipated an adjusted SG&A expense ratio of 8.4-9%. Adjusted effective tax rate is expected within 24.1-25.1%.
Shares outstanding continue to be anticipated between 522.2 million and 525.2 million.
Of the Medical sector players that have reported second-quarter 2024 results so far, the bottom-line results of UnitedHealth Group Incorporated (UNH - Free Report) , Elevance Health, Inc. (ELV - Free Report) and HCA Healthcare, Inc. (HCA - Free Report) beat the Zacks Consensus Estimate.
UnitedHealth Group reported a second-quarter 2024 adjusted EPS of $6.80, which beat the Zacks Consensus Estimate by 2.3%. The bottom line rose 10.7% year over year. Revenues amounted to $98.9 billion, which improved 6.4% year over year in the quarter under review on the back of strong performance in its UnitedHealthcare and Optum business lines. The top line outpaced the consensus mark of $98.7 billion.
Elevance Health reported second-quarter 2024 adjusted EPS of $10.12 per share, which outpaced the Zacks Consensus Estimate by 1.3%. The bottom line improved 12% year over year. Operating revenues of $43.2 billion dipped 0.4% year over year. However, the top line beat the consensus mark by 0.5%.
HCA Healthcare reported a second-quarter 2024 adjusted EPS of $5.50, which beat the Zacks Consensus Estimate by 10.7%. The bottom line improved 28.2% year over year. Revenues amounted to $17.5 billion, which improved 10.3% year over year in the quarter under review. The top line outpaced the consensus mark by 2.2%.
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Centene (CNC) Q2 Earnings Miss on Declining Medicaid Membership
Centene Corporation (CNC - Free Report) reported second-quarter 2024 adjusted earnings per share (EPS) of $2.42, which missed the Zacks Consensus Estimate of $2.44. However, the bottom line improved 15.2% year over year.
Revenues rose 5.9% year over year to $39.8 billion. The top line beat the consensus mark by 9.1%.
The second-quarter earnings were affected by lower Medicaid revenues, service revenues, and higher operating expenses. Reduced membership in Medicaid and Medicare also impacted the earnings. However, Marketplace membership growth acted as a partially offset.
Centene Corporation Price, Consensus and EPS Surprise
Centene Corporation price-consensus-eps-surprise-chart | Centene Corporation Quote
Quarterly Operational Update
Revenues from Medicaid amounted to $20.3 billion, which slipped 8% year over year in the quarter under review, while Medicare revenues rose 6% year over year to $6 billion. Additionally, commercial revenues of $8.5 billion climbed 49% year over year.
Premiums of Centene rose 4.2% year over year to $35.1 billion, higher than the Zacks Consensus Estimate of $33 billion. The improvement came on the back of a growing customer base in the Marketplace business as a result of solid product positioning and growth in the overall market, partly offset by a decline in Medicaid membership stemming from redeterminations.
Service revenues of $833 million dipped 26% year over year and missed the consensus mark of $839 million. Investment and other income rose 8.9% year over year to $463 million, higher than the consensus mark of $448 million.
As of Jun 30, 2024, total membership was 28.5 million, which increased marginally year over year and surpassed the Zacks Consensus Estimate of 27.7 million and our estimate of 27 million. Membership in the Commercial business witnessed a significant year-over-year increase in the second quarter, offsetting the decline in Medicaid and Medicare memberships.
The Health Benefits Ratio (HBR) of CNC deteriorated 60 basis points year over year to 87.6%. However, the metric declined slightly from our estimate of 87.9%.
Adjusted net earnings grew 11.1% year over year to $1.28 billion, higher than our estimate of $1 billion.
Total operating expenses of $38.6 billion increased 6% year over year in the quarter under review, higher than our estimate of $35.1 billion. The increase was due to elevated medical costs and premium tax expenses. The two expense components escalated 4.7% and 38.8%, respectively, on a year-over-year basis.
Adjusted SG&A expense ratio improved 60 basis points year over year to 8% due to marketplace risk adjustment revenues, ongoing expense reduction initiatives and divestiture of Circle Health, which operated at a high SG&A expense ratio.
Financial Update (as of Jun 30, 2024)
Centene exited the second quarter with cash and cash equivalents of $17.6 billion, which increased 2.3% from the 2023-end level. Total assets of $83.1 billion slipped 1.8% from the figure at 2023-end.
Long-term debt amounted to $17.5 billion, which declined 1.1% from the figure as of Dec 31, 2023. The current portion of long-term debt totaled $112 million.
Total stockholders’ equity of $27.4 billion increased 5.8% from the 2023-end figure.
Net cash provided by operating activities was $2.2 billion in the first six months against net cash generated from operations of $6.8 billion in the year-ago period.
Share Repurchase Update
Centene bought back common shares worth $800 million in the second quarter. A leftover capacity of $4.4 billion remained under the company’s share repurchase authorization as of Jul 26, 2024.
2024 Guidance Revised
Management anticipates premium and service revenues within $141-$143 billion, up from the prior guidance of $135.5-$138.5 billion. The midpoint of the updated outlook indicates growth of 1.4% from the 2023 reported figure.
Revenues are estimated to be between $155 billion and $157 billion in 2024, higher than the prior outlook of $147-$150.5 billion. The midpoint of the revised guidance suggests 1.3% growth from the 2023 figure.
Adjusted EPS is forecasted to be greater than $6.80, up from the earlier view of greater than $6.70. The figure reflects an increase of 1.8% from the 2023 figure. GAAP EPS is expected to remain greater than $5.94 in 2024.
HBR is estimated to be near the high end of the range of 87.3-87.9%. The company previously anticipated an adjusted SG&A expense ratio of 8.4-9%. Adjusted effective tax rate is expected within 24.1-25.1%.
Shares outstanding continue to be anticipated between 522.2 million and 525.2 million.
Zacks Rank
Centene currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Other Medical Sector Releases
Of the Medical sector players that have reported second-quarter 2024 results so far, the bottom-line results of UnitedHealth Group Incorporated (UNH - Free Report) , Elevance Health, Inc. (ELV - Free Report) and HCA Healthcare, Inc. (HCA - Free Report) beat the Zacks Consensus Estimate.
UnitedHealth Group reported a second-quarter 2024 adjusted EPS of $6.80, which beat the Zacks Consensus Estimate by 2.3%. The bottom line rose 10.7% year over year. Revenues amounted to $98.9 billion, which improved 6.4% year over year in the quarter under review on the back of strong performance in its UnitedHealthcare and Optum business lines. The top line outpaced the consensus mark of $98.7 billion.
Elevance Health reported second-quarter 2024 adjusted EPS of $10.12 per share, which outpaced the Zacks Consensus Estimate by 1.3%. The bottom line improved 12% year over year. Operating revenues of $43.2 billion dipped 0.4% year over year. However, the top line beat the consensus mark by 0.5%.
HCA Healthcare reported a second-quarter 2024 adjusted EPS of $5.50, which beat the Zacks Consensus Estimate by 10.7%. The bottom line improved 28.2% year over year. Revenues amounted to $17.5 billion, which improved 10.3% year over year in the quarter under review. The top line outpaced the consensus mark by 2.2%.