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Centene (CNC) Up 7.2% Since Last Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for Centene (CNC - Free Report) . Shares have added about 7.2% 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 Q3 Earnings Miss Estimates, Revenues Up Y/Y

Centene reported third-quarter 2021 adjusted earnings per share of $1.26, which missed the Zacks Consensus Estimate by 2.3%. The bottom line remained flat year over year.

The company’s results benefited on the back of higher revenues and overall membership growth, partly offset by elevated selling, general and administrative (“SG&A”) costs.

Quarterly Operational Update

Total revenues advanced 11% year over year to $32.4 billion in the third quarter. The improvement was driven by an uptick in Medicare and Medicaid membership, initiation of contracts in North Carolina, and the acquisitions of PANTHERx and Circle Health. The top line beat the consensus mark by 1.9%.

Managed care membership as of Sep 30, 2021, totaled 26.5 million, which rose 5% year over year.

In the quarter under review, Health Benefits Ratio (HBR) came in at 88.1%, which expanded 170 basis points (bps) year over year. The metric was hurt by the repeal of the health insurer fee.

SG&A expenses of $2.7 billion increased 7.1% year over year in the third quarter. Meanwhile, adjusted SG&A expense ratio improved 30 bps year over year to 8.6% in the third quarter. The improved performance of the metric resulted from the Medicaid membership growth and the recent PANTHERx buyout leading to leveraging of expenses over increased revenues.

Financial Update (as of Sep 30, 2021)

The company exited the third quarter with cash and cash equivalents of $13.4 billion, which rose 24.3% from the 2020-end level. Total assets of $77.7 billion grew 13.1% from the figure at the 2020 end.

The company’s long-term debt amounted to $18.6 billion, which increased 11.5% from the level as of Dec 31, 2020.

In the first nine months of 2021, net cash provided by operating activities totaled $3.5 billion, which climbed 40% from the prior-year comparable period.

2021 Guidance Updated

Concurrent with third-quarter results, the company revised its full-year outlook for certain metrics. In 2021, management estimates revenues to lie within $125.2-$126.4 billion, up from the previous range of $123.3-$125.3 billion.

Adjusted EPS is anticipated to be $5.05-$5.15 compared with the previous guidance of $5.05-$5.35. This year, HBR is projected between 87.6% and 88% compared with the prior guidance of 87.5% and 88.1%.

Adjusted SG&A expense ratio is expected to lie within 8.2-8.6%, higher than the previous outlook of 8-8.4%.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended upward during the past month.

VGM Scores

Currently, Centene has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.


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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