A month has gone by since the last earnings report for Centene (CNC Quick QuoteCNC - Free Report) . Shares have added about 5.7% 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 Q1 Earnings Beat Estimates, Ups '22 EPS View

Centene Corporation reported first-quarter 2022 adjusted earnings per share of $1.83, which surpassed the Zacks Consensus Estimate by 8.9%. The bottom line improved 12.3% year over year.

CNC’s first-quarter results benefited from top-line growth stemming from 22% improvement in premium and service revenues. Uptick in managed care membership contributed to the sound quarterly performance of the health insurer. However, the upside was partly offset by escalating operating expenses resulting from higher medical costs, cost of services and premium tax expense.

Quarterly Operational Update

Total revenues of Centene rose 24% year over year to $37.2 billion in the first quarter. The improvement can be attributed to organic Medicaid growth, strong Medicare membership growth, buyouts of Magellan Health and Circle Health, and initiation of CNC’s contracts in North Carolina. The top line beat the consensus mark by 7.2%.

Managed care membership grew 8% year over year to 26.2 million as of Mar 31, 2022.

Health Benefits Ratio (HBR) of 87.3% deteriorated 50 basis points (bps) year over year in the quarter under review. Traditional Medicaid medical utilization returning to more normalized levels somewhat dampened the metric. However, the same was partly driven by pricing actions and reduced traditional utilization in the Marketplace business.

Meanwhile, total operating expenses escalated 24.2% year over year to $35.9 billion. Selling, general and administrative (SG&A) expenses of $2.7 billion increased 22.9% year over year in the first quarter.

Adjusted SG&A expense ratio was 7.7%, which deteriorated 10 bps year over year in the quarter under review. Inclusion of Magellan Health and Circle Health businesses partly weighed on the metric, which was somewhat offset by higher membership and retroactive state directed payments leading to leveraging of expenses over increased revenues.

Financial Update (as of Mar 31, 2022)

Cash and cash equivalents of Centene totaled $11.2 billion in the first quarter, which plunged 14.3% from the 2021-end level.

Total assets of $82.9 billion increased 5.8% from the figure at the 2021 end.

CNC’s long-term debt inched up 0.4% from the 2021-end level to $18.6 billion.

Total stockholders’ equity amounted to $27.3 billion, which grew 1.4% from the 2021-end figure.

Repurchase Update

During the first quarter, Centene bought back common shares worth $71 million.

2022 Guidance Hiked

Based on continued strength across Centene’s business and revised expectations about Medicaid redeterminations’ timing, the health insurer upped its view for 2022 with respect to certain metrics.

Management now forecast revenues to lie within $139.9 billion and $141.9 billion, higher than the prior guidance of $135.9-$137.9 billion. The mid-point of the revised guidance indicates 11.8% growth from the 2021 figure.

Premium and service revenues are anticipated between $132.3 billion and $134.3 billion, up from the earlier view of $129.8-$131.8 billion. The mid-point of the revised guidance hints toward a 13% rise from the 2021 figure.

Adjusted diluted EPS is projected to be $5.40-$5.55, higher from the previous outlook of $5.30-$5.50. The mid-point of the altered guidance suggests 6.3% improvement from the 2021 figure.

CNC maintains its view for 2022 with respect to HBR and adjusted SG&A expense ratio. While it continues to expect HBR between 87.6% and 88.2%, adjusted SG&A expense ratio is estimated to lie within 7.8-8.3%.

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 nice Growth Score of B, though it is lagging a bit 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.