Back to top

Image: Shutterstock

Centene (CNC) Raises 2022 Guidance, Ups Share Buyback Fund

Read MoreHide Full Article

Centene Corporation (CNC - Free Report) recently provided an improved 2022 guidance. Also, CNC increased its stock repurchase program and authorized a new debt buyback program. The upbeat guidance should instill investors’ confidence in the stock.

Centene’s 2022 adjusted earnings per share (EPS) are projected within $5.55-$5.70, up from the previous outlook of $5.40-$5.55. The midpoint of the altered guidance suggests a 9.2% improvement from the 2021 figure. Further, CNC expects adjusted EPS to rise to $7.50-$7.75 in 2024, implying 48% growth from the 2021 levels.

Premium and service revenues for 2022 are anticipated between $134.3 billion and $136.3 billion, up from the earlier view of $132.3-$134.3 billion. The midpoint of the revised guidance hints at a 14.7% rise from the 2021 figure. Centene's leading position in the industry, supported by its prudent operating performance, might help achieving the set goals.

CNC’s improvement in guidance incorporates higher Medicaid premium revenues and a favorable second-quarter performance. CNC intends to reduce its real-estate footprint to improve efficiency. Early termination of leases, which will reduce its domestic leased space by 65%, might induce pre-tax costs of around $750-$800 million, including impairments. While the costs will likely be recorded during the second and the third quarter, these are not expected to affect CNC’s adjusted EPS.

Rationalization of its real estate is expected to lead to a decline in leased real-estate expenses by $180-$200 million per annum. The latest guidance doesn’t include Magellan Rx and PANTHERx divestment plans. Centene also increased its existing share buyback program by $3 billion. CNC bought back $200 -million worth of stocks in May. Currently, CNC has $3.6 billion remaining under its share buyback program.

Additionally, Centene announced a new $1-billion debt buyback plan. CNC intends to use majority of the proceeds from the Magellan Rx and PANTHERx divestments to repurchase shares and reduce its debt burden. CNC’s long-term debt inched up 0.4% from the 2021-end level to $18.6 billion at the first-quarter 2022 end. Hence, its focus on reducing debt is praiseworthy.

Price Performance

Centene’s shares have increased 5.8% in the past year compared with the industry’s 10.8% rise.

Zacks Investment Research
Image Source: Zacks Investment Research

Zacks Rank and Key Picks

Centene currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the medical space are Select Medical Holdings Corporation (SEM - Free Report) , Altimmune, Inc. (ALT - Free Report) and Progyny, Inc. (PGNY - Free Report) , each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for Select Medical’s earnings is currently pegged at $2.19 per share. SEM has witnessed one upward estimate revision in the past 60 days against none in the opposite direction.

Select Medical’s earnings beat estimates in each of the last four quarters, the average being 42%.

The Zacks Consensus Estimate for Altimmune’s 2022 bottom line indicates an 8.2% improvement from the 2021 levels. ALT has witnessed four upward estimate revisions in the past 60 days against none in the opposite direction.

Altimmune’s earnings beat estimates in three of the last four quarters and missed once.

The Zacks Consensus Estimate for Progyny’s 2022 bottom line has improved 4.5 times in the past 60 days. PGNY has witnessed three upward estimate revisions during the same time period against none in the opposite direction.

Progyny’s earnings beat estimates in each of the last four quarters, the average being 169.7%.