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Bear of the Day: Centene (CNC)

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Headquartered in St. Louis, Centene Corp. (CNC - Free Report) is a multi-national healthcare company that primarily provides services to government sponsored healthcare programs. The company serves the under-insured and uninsured individuals through member-focused services. The recent acquisition of WellCare Health leveraged the company’s position as the largest Medicaid managed care organization in the country.

Despite revenue increasing 50% year-over-year, Centene’s top line of $28.3 billion still lagged our consensus estimate. Q4 GAAP net loss came to $12 million, or $0.02 per share, while adjusted net income was $0.46 for the quarter, much lower than the year-ago figure of $0.73 per share.

There were some bright spots in the report. Medicaid revenue spiked 47% year-over-year, while its commercial business grew 17% to $4.2 billion, both of which helped CNC’s total revenue rebound.

For 2021, CNC expects sales in the range of $116.1 billion and $118.1 billion, with adjusted EPS between $5.00 and $5.30 per share.

Bottom Line

However, CNC is now a Zacks Rank #5 (Strong Sell).

Eight analysts have cut their full year earnings outlook over the past 60 days, and the consensus estimate has fallen 27 cents to $5.16 per share; earnings and sales are expected to notch small year-over-year gains for fiscal 2021, though the outlook looks brighter for fiscal 2022.

Shares are down 7% in the past one-year period compared to the S&P 500’s gain of 16.7%.

Centene Corporation Price and Consensus


Looking at its business, Centene faces some tough headwinds going forward, as analysts still have a bearish outlook on the stock after an incredibly tough 2020.

CNC just announced that it plans to buy Magellan Health Services for $2.2 billion back in January, which, along with the WellCare and PANTHERx acquisitions, will help get Centene back on a steady recovery path.

Investors who are interested in adding a health insurance stock to their portfolio could consider healthcare plan provider giant Humana (HUM - Free Report) . HUM is a #3 (Hold) on the Zacks Rank, with 15.7% expected earnings growth for 2021 and long-term growth of 12% for the next three to five years.

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