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Here's Why You Should Retain Centene (CNC) in Your Portfolio

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Centene Corporation (CNC - Free Report) continues to benefit from consistent top-line growth on the back of several acquisitions and a growing customer base. Solid Medicare and Medicaid businesses coupled with a solid financial position act as other tailwinds for the stock.

Zacks Rank & Price Performance

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

The stock has gained 12% over a year compared with the industry’s rally of 30.2%. Yet, the Zacks Medical sector has lost 14.6% in the said time frame. The S&P 500 composite has risen 23.5% in the same time frame.

Zacks Investment ResearchImage Source: Zacks Investment Research

Favorable Style Score

CNC is well poised for progress, as is evident from its impressive VGM Score of A. Here V stands for Value, G for Growth and M for Momentum, with the score being a weighted combination of all three factors.

Robust Prospects

The Zacks Consensus Estimate for Centene’s 2022 earnings suggests year-over-year growth of 7.7%, while the same for revenues indicates an improvement of 8%.

Positive Estimate Revision

The Zacks Consensus Estimate for 2022 earnings has been revised 2.6% upward in the past 30 days.

Solid Financial Outlook for 2022

Centene recently issued an upbeat business outlook for 2022, which reinstates ample prospects for the healthcare provider.

For 2022, CNC forecasts revenues within $135.9-$137.9 billion, whose mid-point ($136.9 billion) is higher than the 2021 Zacks Consensus Estimate of $126.1 billion. The same is also pegged higher than the 2022 consensus mark of $136.2 billion.

Coming to the bottom line, Centene anticipates the metric in the range of $5.30-$5.50 for 2022. Though the mid-point ($5.40) of the guidance is pegged lower than the 2022 Zacks Consensus Estimate of $5.52, the same is higher than the consensus mark for 2021 ($5.13).

Business Tailwinds

Centene’s revenues have been on an uptrend for a considerable period of time. Strong contributions from Medicare and Medicaid businesses, benefits derived from the WellCare acquisition and membership growth continue to drive CNC’s top-line growth.

CNC boasts solid Medicare and Medicaid businesses, through which it has been devising cost-effective health plans and bolstering reach across inaccessible regions. The healthcare provider delivers high-quality products to around 1 in 15 individuals stretched nationwide.

An aging U.S. population favors Medicare Advantage (“MA”) plans, which is likely to continue driving solid demand for CNC’s Medicare plans. Presently, it caters to more than 1.1 million MA members throughout the United States. To sustain its record of holding a competitive edge in the MA market, Centene continues to pursue expansion plans. In 2022, CNC aims to delve into 327 new counties and three new states of Massachusetts, Nebraska, and Oklahoma through enhanced MA plans.

Centene frequently resorts to buyouts for expanding its capabilities. The much-awaited deal of Centene to purchase Magellan Health was successfully completed right at the start of 2022. Consequent to the buyout, CNC intended to utilize the cutting-edge behavioral health capabilities of Magellan Health and create one of the leading U.S. behavioral health platforms. Per Centene’s management, the acquisition of Magellan is anticipated to add scale across Centene’s specialty care business.

A well-diversified healthcare suite and solid nationwide presence have fetched numerous contract wins, and deal renewals for CNC. In 2021, some of the states that have chosen CNC for serving members include Arizona, Nevada and Ohio. These deals continue to provide an impetus to the managed care membership metric of Centene.

A strong cash position with solid cash-generating abilities equip Centene to undertake growth-related initiatives and engage in prudent capital-deployment moves.

Stocks to Consider

Some better-ranked stocks in the medical space include Universal Health Services, Inc. (UHS - Free Report) , PaciraBioSciences, Inc. (PCRX - Free Report) and Molina Healthcare, Inc. (MOH - Free Report) . While PaciraBioSciences sports a Zacks Rank #1, Universal Health and Molina Healthcare carry a Zacks Rank #2 (Buy) at present.

Universal Health has a trailing four-quarter surprise of 17.64%, on average. The Zacks Consensus Estimate for UHS’ 2022 earnings suggests 3.3% year-over-year growth, while the same for revenues implies growth of 4.2%. Universal Health has a VGM Score of B.

PaciraBioSciences has a trailing four-quarter earnings surprise of 1.59%, on average. The Zacks Consensus Estimate for PCRX’s 2022 earnings and revenues indicates a 43.9% and 33.5% year-over-year improvement, respectively. The consensus mark for PaciraBioSciences’ 2022 earnings has moved 5.7% north over the past 30 days.

Molina Healthcare has a trailing four-quarter earnings surprise of 4.00%, on average. The consensus estimate for MOH’s 2022 earnings and revenues indicates an improvement of 27.3% and 12%, respectively, from the prior-year reported figures. The expected long-term earnings growth rate is pegged at 21.1%, better than the industry’s average of 15%. Molina Healthcare boasts a VGM Score of A.

While Molina Healthcare stock has gained 20% over a year, shares of Universal Health and PaciraBioSciences have lost 7.2% and 13.4%, respectively, in the same time frame.