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Centene Corporation (CNC - Free Report) reported second-quarter 2022 adjusted earnings per share of $1.77, which surpassed the Zacks Consensus Estimate by 2.3%. The bottom line also increased from $1.25 per share a year ago.
Total revenues of Centene rose 16% year over year to $35,936 million in the second quarter. The top line also beat the consensus mark by 1.1%.
The strong second-quarter results were supported by significant membership growth, prudent buyouts of Magellan Health and Circle Health, and organic Medicaid and Medicare growth. The uptick in premiums was a major positive.
Centene Corporation Price, Consensus and EPS Surprise
While revenues from Medicaid rose 8% year over year in the second quarter, revenues from Commercial and Medicare jumped 11% and 26%, respectively. While premiums grew 14.1% year over year to $31,510 million, service revenues almost doubled to $2,458 million. Total membership grew 7.2% year over year to 26.4 million as of Jun 30, 2022.
Health Benefits Ratio (HBR) of 86.7% improved 160 basis points (bps) year over year in the quarter under review. It was supported by Marketplace performance thanks to the pricing actions undertaken and a recovering normalized utilization.
Net loss in the second quarter amounted to $171 million, improving from $535 million net loss a year ago.
Meanwhile, total operating expenses escalated to $36,065 million from $31,443 million a year ago. Selling, general and administrative (SG&A) expenses of $2,800 million increased from $2,139 million in second-quarter 2021. Cost of services jumped to $2,099 million from $1,107 million a year ago. Yet, the cost-of-service ratio declined to 85.4% in the quarter from 89.6% a year ago thanks to the Circle Health business acquisition. Medical costs rose to $27,312 million in the second quarter from $24,389 million a year ago.
Adjusted SG&A expense ratio was 8.2%, which increased from 7.3% in the year-ago quarter. The 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 Jun 30, 2022)
Cash and cash equivalents of Centene totaled $13,435 million in the second quarter, which improved marginally from the 2021-end level of $13,118 million. Total assets of $81.1 billion increased from $78.4 billion at the 2021 end.
CNC’s long-term debt at the second-quarter end was $18,456 million, marginally down from $18,571 million at 2021-end. The current portion of long-term debt was $300 million.
Total stockholders’ equity amounted to $26,430 million, which fell from the 2021-end figure of $26,940 million.
In the first half of 2022, CNC’s net operating cash flow was at $4,505 million, surging from $1,728 million in the year-ago period.
Repurchase Update
During the second quarter, Centene bought back common shares worth $344 million. The company had $3.4 billion remaining in its share buyback program as of Jul 26, 2022. Further, it had $1 billion left under the debt buyback program.
2022 Guidance
Management forecasts revenues to lie within $141.6 billion and $143.6 billion, higher than the prior guidance of $139.9 -$141.9 billion. The mid-point of the revised guidance indicates significant growth from the 2021 figure of $126 billion.
Premium and service revenues are anticipated between $133.3 billion and $135.3 billion, up from the earlier view of $132.3 -$134.3 billion. Adjusted diluted EPS is projected to be $5.60-$5.75, higher than the previous outlook of $5.40-$5.55. The mid-point of the altered guidance suggests an improvement from the 2021 figure of $5.15 per share.
CNC expects HBR between 87.6% and 88%, while adjusted SG&A expense ratio is estimated to lie within 8-8.5%. It also expects an adjusted effective tax rate of 25.3-26.3% for 2022. Diluted shares outstanding will likely be in the range of 583-586 million.
The Zacks Consensus Estimate for Molina Healthcare’s 2022 bottom line indicates a 27.9% increase from the prior-year reported number. MOH beat earnings estimates in three of the past four quarters and missed once, with the average surprise being 1.5%.
The Zacks Consensus Estimate for Affimed’s second quarter 2022 bottom line indicates 5.3% year-over-year growth. AFMD witnessed four upward estimate revisions in the past 60 days against one in the opposite direction.
The Zacks Consensus Estimate for Agenus’ second quarter 2022 bottom line indicates a 37.8% year-over-year improvement. AGEN beat earnings estimates twice in the past four quarters and missed on the other two occasions.
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Centene (CNC) Q2 Earnings Beat Estimates, Boosts 2022 View
Centene Corporation (CNC - Free Report) reported second-quarter 2022 adjusted earnings per share of $1.77, which surpassed the Zacks Consensus Estimate by 2.3%. The bottom line also increased from $1.25 per share a year ago.
Total revenues of Centene rose 16% year over year to $35,936 million in the second quarter. The top line also beat the consensus mark by 1.1%.
The strong second-quarter results were supported by significant membership growth, prudent buyouts of Magellan Health and Circle Health, and organic Medicaid and Medicare growth. The uptick in premiums was a major positive.
Centene Corporation Price, Consensus and EPS Surprise
Centene Corporation price-consensus-eps-surprise-chart | Centene Corporation Quote
Let’s delve deeper.
Quarterly Operational Update
While revenues from Medicaid rose 8% year over year in the second quarter, revenues from Commercial and Medicare jumped 11% and 26%, respectively. While premiums grew 14.1% year over year to $31,510 million, service revenues almost doubled to $2,458 million. Total membership grew 7.2% year over year to 26.4 million as of Jun 30, 2022.
Health Benefits Ratio (HBR) of 86.7% improved 160 basis points (bps) year over year in the quarter under review. It was supported by Marketplace performance thanks to the pricing actions undertaken and a recovering normalized utilization.
Net loss in the second quarter amounted to $171 million, improving from $535 million net loss a year ago.
Meanwhile, total operating expenses escalated to $36,065 million from $31,443 million a year ago. Selling, general and administrative (SG&A) expenses of $2,800 million increased from $2,139 million in second-quarter 2021. Cost of services jumped to $2,099 million from $1,107 million a year ago. Yet, the cost-of-service ratio declined to 85.4% in the quarter from 89.6% a year ago thanks to the Circle Health business acquisition. Medical costs rose to $27,312 million in the second quarter from $24,389 million a year ago.
Adjusted SG&A expense ratio was 8.2%, which increased from 7.3% in the year-ago quarter. The 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 Jun 30, 2022)
Cash and cash equivalents of Centene totaled $13,435 million in the second quarter, which improved marginally from the 2021-end level of $13,118 million. Total assets of $81.1 billion increased from $78.4 billion at the 2021 end.
CNC’s long-term debt at the second-quarter end was $18,456 million, marginally down from $18,571 million at 2021-end. The current portion of long-term debt was $300 million.
Total stockholders’ equity amounted to $26,430 million, which fell from the 2021-end figure of $26,940 million.
In the first half of 2022, CNC’s net operating cash flow was at $4,505 million, surging from $1,728 million in the year-ago period.
Repurchase Update
During the second quarter, Centene bought back common shares worth $344 million. The company had $3.4 billion remaining in its share buyback program as of Jul 26, 2022. Further, it had $1 billion left under the debt buyback program.
2022 Guidance
Management forecasts revenues to lie within $141.6 billion and $143.6 billion, higher than the prior guidance of $139.9 -$141.9 billion. The mid-point of the revised guidance indicates significant growth from the 2021 figure of $126 billion.
Premium and service revenues are anticipated between $133.3 billion and $135.3 billion, up from the earlier view of $132.3 -$134.3 billion. Adjusted diluted EPS is projected to be $5.60-$5.75, higher than the previous outlook of $5.40-$5.55. The mid-point of the altered guidance suggests an improvement from the 2021 figure of $5.15 per share.
CNC expects HBR between 87.6% and 88%, while adjusted SG&A expense ratio is estimated to lie within 8-8.5%. It also expects an adjusted effective tax rate of 25.3-26.3% for 2022. Diluted shares outstanding will likely be in the range of 583-586 million.
Zacks Rank & Key Picks
Centene currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader medical space are Molina Healthcare, Inc. (MOH - Free Report) , Affimed N.V. (AFMD - Free Report) and Agenus Inc. (AGEN - 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 Molina Healthcare’s 2022 bottom line indicates a 27.9% increase from the prior-year reported number. MOH beat earnings estimates in three of the past four quarters and missed once, with the average surprise being 1.5%.
The Zacks Consensus Estimate for Affimed’s second quarter 2022 bottom line indicates 5.3% year-over-year growth. AFMD witnessed four upward estimate revisions in the past 60 days against one in the opposite direction.
The Zacks Consensus Estimate for Agenus’ second quarter 2022 bottom line indicates a 37.8% year-over-year improvement. AGEN beat earnings estimates twice in the past four quarters and missed on the other two occasions.