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Centene (CNC) to Sell Magellan Arm, To Use Proceeds for Buybacks
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Centene Corporation (CNC - Free Report) recently inked a definitive deal to divest Magellan Specialty Health, the specialty benefit management arm of Magellan Health, to Evolent Health. CNC had acquired the divested business in the beginning of this year at the time of purchasing its parent company Magellan Health.
Contingent on U.S. federal antitrust clearance and fulfilment of other customary closing conditions, the transaction is likely to be completed in the first half of 2023. The same is also predicted to be neutral to adjusted earnings per share of Centene within a year of the deal’s closure. Also, once the transaction ends, Centene will enter into a multi-year national strategic collaboration with Evolent, through which it will continue to strengthen its relationship with Magellan Specialty Health.
Centene is anticipated to receive more than $750 million of aggregate proceeds from the transaction, subject to customary purchase price adjustments. CNC is likely to gain nearly $600 million funds generated from the culmination of the deal, with at least $400 million in cash and the remainder to be acquired through Evolent common stock. Plus, CNC will receive maximum liquidity of $150 million and Evolent's common stock in 2024 provided specific performance parameters are met.
Centene aims to utilize most of the transaction proceeds for share repurchases, while the remainder will be spent on debt repayment. This endeavor is well-timed as CNC had funds worth $2.2 billion left under its share buyback program as of Oct 25, 2022.
Additionally, Centene continues to grapple with a leveraged balance sheet inducing higher interest expenses. Therefore, a declining debt level resulting from the Magellan Specialty Health divestiture proceeds is expected to lower interest expenses and sustain the existing cash reserves to pursue growth-related initiatives.
CNC seems to be on a divestiture spree in 2022. While it sold the pharmacy business PANTHERx in July 2022, it is likely to divest Magellan Rx, another arm of Magellan and a comprehensive pharmacy solutions organization, in the fourth quarter of 2022.
Despite being equipped with cutting-edge capabilities, Centene decided to sell off the two pharmacy businesses to intensify its focus on its core Managed Care business. Riding on numerous contract wins and growing membership, the business extends its health plan coverage to individuals via government-subsidized and commercial programs.
On the same day of announcing the Magellan Specialty Health divestiture, Centene completed the sale of its Spanish and Central European businesses within the targeted time period (2022 end).
Shares of Centene have gained 7.4% in a year compared with the industry’s rally of 13.3%.
The bottom line of Elevance Health surpassed estimates in each of the last four quarters, the average being 4.11%. The Zacks Consensus Estimate for ELV’s 2022 earnings indicates 11.7% growth, while the same for revenues suggests a 13.7% rise from their corresponding prior-year actuals. The consensus mark for ELV’s 2022 earnings has moved 2.4% north in the past 30 days.
Assertio’s earnings beat estimates in three of the trailing four quarters and missed the mark once, the average surprise being 54.96%. The Zacks Consensus Estimate for ASRT’s 2022 earnings is pegged at 52 cents per share. A loss of 3 cents was reported in the prior year. The same for revenues implies 27.7% growth from the year-ago reported figure. The consensus mark for ASRT’s 2022 earnings has moved 2% north in the past 30 days.
The bottom line of Lantheus outpaced estimates in each of the trailing four quarters, the average being 51.09%. The Zacks Consensus Estimate for LNTH’s 2022 earnings is pegged at $3.82 per share, indicating to increase nearly eight-fold from the prior-year reported figure. The consensus mark for LNTH’s 2022 earnings has moved 8.2% north in the past 30 days.
Shares of Elevance Health, Assertio and Lantheus have gained 12%, 96.5% and 90.2%, respectively, in a year.
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Centene (CNC) to Sell Magellan Arm, To Use Proceeds for Buybacks
Centene Corporation (CNC - Free Report) recently inked a definitive deal to divest Magellan Specialty Health, the specialty benefit management arm of Magellan Health, to Evolent Health. CNC had acquired the divested business in the beginning of this year at the time of purchasing its parent company Magellan Health.
Contingent on U.S. federal antitrust clearance and fulfilment of other customary closing conditions, the transaction is likely to be completed in the first half of 2023. The same is also predicted to be neutral to adjusted earnings per share of Centene within a year of the deal’s closure. Also, once the transaction ends, Centene will enter into a multi-year national strategic collaboration with Evolent, through which it will continue to strengthen its relationship with Magellan Specialty Health.
Centene is anticipated to receive more than $750 million of aggregate proceeds from the transaction, subject to customary purchase price adjustments. CNC is likely to gain nearly $600 million funds generated from the culmination of the deal, with at least $400 million in cash and the remainder to be acquired through Evolent common stock. Plus, CNC will receive maximum liquidity of $150 million and Evolent's common stock in 2024 provided specific performance parameters are met.
Centene aims to utilize most of the transaction proceeds for share repurchases, while the remainder will be spent on debt repayment. This endeavor is well-timed as CNC had funds worth $2.2 billion left under its share buyback program as of Oct 25, 2022.
Additionally, Centene continues to grapple with a leveraged balance sheet inducing higher interest expenses. Therefore, a declining debt level resulting from the Magellan Specialty Health divestiture proceeds is expected to lower interest expenses and sustain the existing cash reserves to pursue growth-related initiatives.
CNC seems to be on a divestiture spree in 2022. While it sold the pharmacy business PANTHERx in July 2022, it is likely to divest Magellan Rx, another arm of Magellan and a comprehensive pharmacy solutions organization, in the fourth quarter of 2022.
Despite being equipped with cutting-edge capabilities, Centene decided to sell off the two pharmacy businesses to intensify its focus on its core Managed Care business. Riding on numerous contract wins and growing membership, the business extends its health plan coverage to individuals via government-subsidized and commercial programs.
On the same day of announcing the Magellan Specialty Health divestiture, Centene completed the sale of its Spanish and Central European businesses within the targeted time period (2022 end).
Shares of Centene have gained 7.4% in a year compared with the industry’s rally of 13.3%.
Image Source: Zacks Investment Research
Zacks Rank & Key Picks
Centene currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the Medical space are Elevance Health Inc. (ELV - Free Report) , Assertio Holdings, Inc. (ASRT - Free Report) and Lantheus Holdings, Inc. (LNTH - Free Report) , each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The bottom line of Elevance Health surpassed estimates in each of the last four quarters, the average being 4.11%. The Zacks Consensus Estimate for ELV’s 2022 earnings indicates 11.7% growth, while the same for revenues suggests a 13.7% rise from their corresponding prior-year actuals. The consensus mark for ELV’s 2022 earnings has moved 2.4% north in the past 30 days.
Assertio’s earnings beat estimates in three of the trailing four quarters and missed the mark once, the average surprise being 54.96%. The Zacks Consensus Estimate for ASRT’s 2022 earnings is pegged at 52 cents per share. A loss of 3 cents was reported in the prior year. The same for revenues implies 27.7% growth from the year-ago reported figure. The consensus mark for ASRT’s 2022 earnings has moved 2% north in the past 30 days.
The bottom line of Lantheus outpaced estimates in each of the trailing four quarters, the average being 51.09%. The Zacks Consensus Estimate for LNTH’s 2022 earnings is pegged at $3.82 per share, indicating to increase nearly eight-fold from the prior-year reported figure. The consensus mark for LNTH’s 2022 earnings has moved 8.2% north in the past 30 days.
Shares of Elevance Health, Assertio and Lantheus have gained 12%, 96.5% and 90.2%, respectively, in a year.