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Centene (CNC) Reaches 52-Week High on Solid 2Q18 Performance

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Shares of Centene Corporation’s (CNC - Free Report) hit a 52-week high of $139.93 in Friday’s trading session before closing a tad lower at $138.49, primarily driven by the company’s solid performance in the second quarter as well as its raised guidance for 2018.

Moreover, the stock has had an extremely impressive run over the past year with its shares soaring nearly 67%, substantially higher than its industry’s surge of more than 33.5%.



 We believe that this company with its Zacks Rank #3 (Hold) has great growth potential, which is also apparent from its long-term earnings growth rate of 14.7%.

Catalysts Driving the Stock

Solid 2Q18 Results: Centene delivered solid second-quarter 2018 results with adjusted net income per share of $1.80, beating the Zacks Consensus Estimate by 2.3%. Also, the bottom line improved 13.2% year over year. Revenues also increased 19% year over year to $14.2 billion, backed by growth in the Health Insurance Marketplace business, robust acquisitions, expansions and new programs. Cash and cash equivalents of the company and total assets grew 64.7% and 31.5%, respectively.

Raised Guidance: The company has lifted its 2018 outlook, which is another driving factor. It now expects earnings per share or EPS in the range of $6.80-$7.16, up from the previous projection of $6.75-$7.15. The top line is anticipated in the band of $59.2-$60 billion, up from the earlier forecast of $58.2-$59.0 billion. This should further instill investors’ confidence in the company.

Increasing Revenues: The company has been witnessing a steady revenue rise since 2012 at a CAGR of 42% from 2012 to 2017. In the first half of 2018, it came up with revenue growth of 13% driven by acquisitions, expansions and a flourishing Health Insurance Marketplace business. Given the company’s solid fundamentals, revenues would continue to expand significantly in the upcoming quarters as well.

Acquisitions: The company has been extremely active when it comes to acquisitions. In March 2016, it acquired Health Net, contributing to the company’s top line. Centene also expanded its presence in the Medicaid market of Louisiana through a transaction with Community Health Solutions of America. In July 2018, it acquired Fidelis for broadening its Medicare business. In the ongoing year, the company also bought both MHM Services, Inc. and Community Medical Holdings Corp.

Strong Balance Sheet: This has been highly backed by the company’s solid financial health. Net cash flow from operations that has financed Centene’s investments since 2010 has been quite sturdy. At second-quarter end, cash flow for the first half of the year was $1.3 billion, up 40% from the first half of 2017-level.

Earnings Surprise History: The company has managed to deliver a trailing four-quarter positive surprise of 6.62%, driven by its firm fundamentals, strategic dispositions, accretive buyouts and a sound balance sheet.

The above-mentioned factors along with the company’s core strength are likely to help Centene continue with its bull run.

Stocks to Consider

Investors looking for some better-ranked impressive stocks may consider options like WellCare Health Plans, Inc. , Anthem, Inc. and Humana Inc. (HUM - Free Report) .

WellCare Health Plans, Inc. provides managed care services for government-sponsored health care programs. The company came up with a positive earnings surprise in all the last four quarters with an average beat of 53.89%. The stock carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Operating as a health benefits company in the United States, Anthem, Inc. pulled of an encouraging positive earnings surprise of 6.65% over the preceding four quarters. It holds a Zacks Rank of 2.

Humana Inc. and its subsidiaries work as a health and well-being company in the United States. The stock carries a Zacks Rank of 3 and delivered a positive surprise of 6.16%.

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