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Centene (CNC) Down 3.6% Since Last Earnings Report: Can It Rebound?
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A month has gone by since the last earnings report for Centene (CNC - Free Report) . Shares have lost about 3.6% in that time frame, outperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Centene due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Centene Q4 Earnings Beat on Solid Membership Growth
Centene reported fourth-quarter 2021 adjusted earnings per share of $1.01, which outpaced the Zacks Consensus Estimate by 3.1%. The bottom line more than doubled year over year.
The strong quarterly performance reflects revenue growth supported by 15% growth in premium and service revenues. Overall membership growth contributed to the upside. However, the improvement was partly offset by elevated operating expenses.
Quarterly Operational Update
Centene’s total revenues amounted to $32.6 billion in the fourth quarter, which rose 15% year over year. The growth was driven by increased Medicare and Medicaid membership, initiation of contracts in North Carolina, and the acquisitions of PANTHERx and Circle Health. The top line missed the consensus mark by a whisker.
As of Dec 31, 2021, managed care membership rose 4% year over year to 26.6 million.
In the quarter under review, Health Benefits Ratio (HBR) came in at 87.9%, which improved 50 basis points (bps) year over year. The metric gained on the back of reduced testing and treatment costs linked with COVID-19 pandemic across the Health Insurance Marketplace business.
Total operating expenses of $32 billion escalated 13.1% year over year.
Selling, general and administrative (SG&A) expenses increased 4.4% year over year to $2.8 billion.
Meanwhile, adjusted SG&A expense ratio improved 50 bps year over year to 9.2% in the fourth quarter. The metric’s performance was driven by membership growth and the PANTHERx buyout leading to leveraging of expenses over increased revenues. Reduced acquisition related costs accounted for better performance of the metric.
Financial Update (as of Dec 31, 2021)
Centene exited the fourth quarter with cash and cash equivalents of $13.1 billion, which climbed 21.5% from the 2020-end level.
Total assets increased 14.1% from the figure at 2020 end to $78.4 billion. CNC’s long-term debt amounted to $18.6 billion, up 11.3% from the level as of Dec 31, 2020.
Total stockholders’ equity of $26.8 billion increased 4% from the 2020-end figure.
Full-Year Update
For 2021, total revenues climbed 13% year over year to $126 billion but missed the Zacks Consensus Estimate of $126.2 billion.
Adjusted EPS of Centene stood at $5.15 per share beat the Zacks Consensus Estimate of $5.12. The bottom line advanced 3% year over year.
HBR for the full year came in at 87.8%, which deteriorated 160 bps year over year.
Adjusted SG&A expense ratio of 8.4% improved 50 bps year over year.
In 2021, net cash provided by operating activities totaled $4.2 billion, which plunged 23.6% from the 2020-end figure.
2022 Guidance
Earlier, Centene had disclosed its outlook for 2022 at December 2021 Investor Day. CNC maintains its view for 2022 with respect to most of the metrics.
Management projects revenues to lie within $135.9-$137.9 billion, which suggests an increase from the 2021 level of $126 billion.
Adjusted EPS is anticipated to be $5.30-$5.50, which indicates an improvement from $5.15 reported in 2021.
This year, HBR is estimated between 87.6% and 88.2%.
Adjusted SG&A expense ratio is expected to lie within 7.8-8.3%
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
VGM Scores
At this time, Centene has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. 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 downward for the stock, and the magnitude of these revisions indicates a downward shift. 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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Centene (CNC) Down 3.6% Since Last Earnings Report: Can It Rebound?
A month has gone by since the last earnings report for Centene (CNC - Free Report) . Shares have lost about 3.6% in that time frame, outperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Centene due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Centene Q4 Earnings Beat on Solid Membership Growth
Centene reported fourth-quarter 2021 adjusted earnings per share of $1.01, which outpaced the Zacks Consensus Estimate by 3.1%. The bottom line more than doubled year over year.
The strong quarterly performance reflects revenue growth supported by 15% growth in premium and service revenues. Overall membership growth contributed to the upside. However, the improvement was partly offset by elevated operating expenses.
Quarterly Operational Update
Centene’s total revenues amounted to $32.6 billion in the fourth quarter, which rose 15% year over year. The growth was driven by increased Medicare and Medicaid membership, initiation of contracts in North Carolina, and the acquisitions of PANTHERx and Circle Health. The top line missed the consensus mark by a whisker.
As of Dec 31, 2021, managed care membership rose 4% year over year to 26.6 million.
In the quarter under review, Health Benefits Ratio (HBR) came in at 87.9%, which improved 50 basis points (bps) year over year. The metric gained on the back of reduced testing and treatment costs linked with COVID-19 pandemic across the Health Insurance Marketplace business.
Total operating expenses of $32 billion escalated 13.1% year over year.
Selling, general and administrative (SG&A) expenses increased 4.4% year over year to $2.8 billion.
Meanwhile, adjusted SG&A expense ratio improved 50 bps year over year to 9.2% in the fourth quarter. The metric’s performance was driven by membership growth and the PANTHERx buyout leading to leveraging of expenses over increased revenues. Reduced acquisition related costs accounted for better performance of the metric.
Financial Update (as of Dec 31, 2021)
Centene exited the fourth quarter with cash and cash equivalents of $13.1 billion, which climbed 21.5% from the 2020-end level.
Total assets increased 14.1% from the figure at 2020 end to $78.4 billion.
CNC’s long-term debt amounted to $18.6 billion, up 11.3% from the level as of Dec 31, 2020.
Total stockholders’ equity of $26.8 billion increased 4% from the 2020-end figure.
Full-Year Update
For 2021, total revenues climbed 13% year over year to $126 billion but missed the Zacks Consensus Estimate of $126.2 billion.
Adjusted EPS of Centene stood at $5.15 per share beat the Zacks Consensus Estimate of $5.12. The bottom line advanced 3% year over year.
HBR for the full year came in at 87.8%, which deteriorated 160 bps year over year.
Adjusted SG&A expense ratio of 8.4% improved 50 bps year over year.
In 2021, net cash provided by operating activities totaled $4.2 billion, which plunged 23.6% from the 2020-end figure.
2022 Guidance
Earlier, Centene had disclosed its outlook for 2022 at December 2021 Investor Day. CNC maintains its view for 2022 with respect to most of the metrics.
Management projects revenues to lie within $135.9-$137.9 billion, which suggests an increase from the 2021 level of $126 billion.
Adjusted EPS is anticipated to be $5.30-$5.50, which indicates an improvement from $5.15 reported in 2021.
This year, HBR is estimated between 87.6% and 88.2%.
Adjusted SG&A expense ratio is expected to lie within 7.8-8.3%
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
VGM Scores
At this time, Centene has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. 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 downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Centene has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.