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Centene (CNC) Beats Q2 Earnings Estimates, Revises Guidance

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Centene Inc. (CNC - Free Report) reported second-quarter 2018 adjusted net income per share of $1.80, which beat the Zacks Consensus Estimate by 2.3%. Also, the bottom line improved 13.2% year over year.

Centene Corporation Price, Consensus and EPS Surprise
 

For the second quarter, total revenues rose 19% to $14.2 billion from the year-ago period, primarily driven by growth in the Health Insurance Marketplace business in 2018, strategic acquisitions, expansions and new programs across many of the states in 2017 and 2018 as well as the reinstatement of the health insurer fee in 2018. The upside was partially offset by the impact of removal of the in-home support services (IHSS) program from California's Medicaid contract in January 2018. Moreover, the top line surpassed the Zacks Consensus Estimate by 2.9%.

Quarterly Operational Update

As of Jun 30, 2018, managed care membership came in at 12.8 million, a 5% increase over Jun 30, 2017.

Health Benefit Ratio (HBR) for the reported quarter was 85.7% compared with 86.3% in the prior-year period. This reflects a year-over-year improvement of 60 basis points (bps) owing to membership growth in the Health Insurance Marketplace business and the reinstatement of the health insurer fee in 2018.The decrease was offset to some extent by the impact of retroactive minimum medical loss ratio (MLR) changes under California's Medicaid expansion program.

Adjusted Selling, General & Administrative (SG&A) expense ratio of 9.6% for the second quarter of 2018 compared unfavorably with 9.3% for the second quarter of 2017. This represents a deterioration of 30 basis points year over year, arising from growth in the Health Insurance Marketplace business, which operates at a higher SG&A expense ratio.

Financial Update (As of Jun 30, 2018)

Centene had cash and cash equivalents of $6.7 billion, up 64.7% from 2017 end.

Total assets of $28.7 billion grew 31.5%.

Centene’s long-term debt totaled $6.2 billion, up 33.6%.

At the end of the second quarter of 2018, cash outflow from operations was $526 million. Cash flow from operations for the six months ending Jun 30, 2018 was $1.3 billion, up 40% from the first half of 2017.

2018 Guidance Updated

Centene expects adjusted earnings per share in the range of $6.80-$7.16, up from the previous projection of $6.75-$7.15.

Total revenues are anticipated in the band of $59.2-$60 billion, up from the earlier forecast of $58.2-$59.0 billion.

HBR is estimated at 85.9-86.4%.

Adjusted SG&A expense ratio is predicted at 9.4-9.9%, up from the former outlook of 9.4-9.8%.

Zacks Rank

Centene carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Peer Releases

UnitedHealth Group Incorporated (UNH - Free Report) second-quarter bottom line beat estimates on the back of higher revenues and solid performances by both segments in the last reported quarter.  

Molina Healthcare, Inc. (MOH - Free Report) is set to release second-quarter 2018 earnings on Aug 1 and the consensus mark for the same stands at $1.09 per share, representing improvement from a loss of 1 cent in the year-ago quarter. The stock carries a Zacks Rank #2 (Buy).

Humana Inc. (HUM - Free Report) is slated to release second-quarter 2018 earnings on Aug 1 and the Zacks Consensus Estimate for the same is pegged at $3.79, reflecting a year-over-year rise of 8.6%. The stock has a Zacks Rank of 2.

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