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Why Is Centene (CNC) Up 13.1% Since Last Earnings Report?
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It has been about a month since the last earnings report for Centene (CNC - Free Report) . Shares have added about 13.1% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Centene due for a pullback? 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 catalysts.
Centene reported first-quarter 2019 adjusted earnings per share of $1.39, beating the Zacks Consensus Estimate by 5.3%. Also, the bottom line improved 27.5% year over year.
Total revenues jumped 40% to $18.4 billion in the period from the year-ago figure, primarily aided by the purchase of Fidelis Care, expansions and new programs across many states in 2018 and 2019 besides growth in the Health Insurance Marketplace business in 2019. Other factors, such as pass through payments contributed to the company’s revenues.
However, the same was partially offset by the health insurer fee moratorium in 2019. Moreover, the top line surpassed the Zacks Consensus Estimate by nearly 5%.
Quarterly Operational Update
As of Mar 31, 2019, managed care membership came in at 14.7 million, reflecting a 14% year-over-year increase.
Health Benefit Ratio (HBR) in the reported quarter was 85.7% compared with 84.3% in the prior-year period. This 140-basis point (bps) expansion is mainly owing to the Fidelis Care acquisition and the impact of the health insurer fee moratorium in 2019.
Adjusted Selling, General & Administrative (SG&A) expense ratio in the first quarter was 9.5% compared with 10.3% in the same period last year. This contraction of 80 basis points year over year is due to the impact of the Fidelis Care buyout, which operates at a low SG&A expense ratio.
Financial Results
As of Mar 31, 2019, the company's cash and cash equivalents totaled $6.3 billion, up 18.8 % from the figure at 2018 end.
As of Mar 31, 2019, total assets rose 8.6% from the 2018 end-level to $33.6 billion.
Centene’s long-term debt summed $6.8 billion, inching up 1.9% from the level at 2018 end.
At the end of first-quarter 2019, cash flow from operations was $1.3 billion, down 28.7% from the level as of Dec 31, 2018.
Capital Deployment
In February 2019, the company’s two-for-one stock split of its shares of common stock became effective. In the quarter under review, the company bought back shares worth $35 million.
Updated 2019 Outlook
Following strong first-quarter results, the company has revised its 2019 guidance.
It expects its total revenues in the band of $72.8-73.6 billion, up from the previous projection of $70.3-$71.1 billion. Effective tax rate has been decreased 50 bps because of the favorable audit results recognized in the first quarter.
Adjusted EPS is predicted in the $4.24-$4.44 range, up from the earlier expectation of $4.11-$4.31. This is because of solid first-quarter results. HBR is expected within 86.5-87%. Adjusted SG & An expense ratio is estimated between 9.3% and 9.8%.
Acquisition Update
In March 2019, the company signed a definitive agreement to buy the issued and outstanding shares of WellCare Health Plans, Inc. The transaction, valued at 417.3 billion, is likely to be completed in the first half of 2020, subject to closed conditions.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
VGM Scores
Currently, Centene has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. However, 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 looks promising. 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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Why Is Centene (CNC) Up 13.1% Since Last Earnings Report?
It has been about a month since the last earnings report for Centene (CNC - Free Report) . Shares have added about 13.1% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Centene due for a pullback? 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 catalysts.
Centene’s Q1 Earnings Beat Estimates, Increase Y/Y
Centene reported first-quarter 2019 adjusted earnings per share of $1.39, beating the Zacks Consensus Estimate by 5.3%. Also, the bottom line improved 27.5% year over year.
Total revenues jumped 40% to $18.4 billion in the period from the year-ago figure, primarily aided by the purchase of Fidelis Care, expansions and new programs across many states in 2018 and 2019 besides growth in the Health Insurance Marketplace business in 2019. Other factors, such as pass through payments contributed to the company’s revenues.
However, the same was partially offset by the health insurer fee moratorium in 2019. Moreover, the top line surpassed the Zacks Consensus Estimate by nearly 5%.
Quarterly Operational Update
As of Mar 31, 2019, managed care membership came in at 14.7 million, reflecting a 14% year-over-year increase.
Health Benefit Ratio (HBR) in the reported quarter was 85.7% compared with 84.3% in the prior-year period. This 140-basis point (bps) expansion is mainly owing to the Fidelis Care acquisition and the impact of the health insurer fee moratorium in 2019.
Adjusted Selling, General & Administrative (SG&A) expense ratio in the first quarter was 9.5% compared with 10.3% in the same period last year. This contraction of 80 basis points year over year is due to the impact of the Fidelis Care buyout, which operates at a low SG&A expense ratio.
Financial Results
As of Mar 31, 2019, the company's cash and cash equivalents totaled $6.3 billion, up 18.8 % from the figure at 2018 end.
As of Mar 31, 2019, total assets rose 8.6% from the 2018 end-level to $33.6 billion.
Centene’s long-term debt summed $6.8 billion, inching up 1.9% from the level at 2018 end.
At the end of first-quarter 2019, cash flow from operations was $1.3 billion, down 28.7% from the level as of Dec 31, 2018.
Capital Deployment
In February 2019, the company’s two-for-one stock split of its shares of common stock became effective. In the quarter under review, the company bought back shares worth $35 million.
Updated 2019 Outlook
Following strong first-quarter results, the company has revised its 2019 guidance.
It expects its total revenues in the band of $72.8-73.6 billion, up from the previous projection of $70.3-$71.1 billion.
Effective tax rate has been decreased 50 bps because of the favorable audit results recognized in the first quarter.
Adjusted EPS is predicted in the $4.24-$4.44 range, up from the earlier expectation of $4.11-$4.31. This is because of solid first-quarter results.
HBR is expected within 86.5-87%. Adjusted SG & An expense ratio is estimated between 9.3% and 9.8%.
Acquisition Update
In March 2019, the company signed a definitive agreement to buy the issued and outstanding shares of WellCare Health Plans, Inc. The transaction, valued at 417.3 billion, is likely to be completed in the first half of 2020, subject to closed conditions.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
VGM Scores
Currently, Centene has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. However, 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 looks promising. Notably, Centene has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.