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Centene (CNC) Q3 Earnings Top on Medicaid Arm, Revenues Rise Y/Y
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Centene Corporation (CNC - Free Report) reported third-quarter 2022 adjusted earnings per share (EPS) of $1.30, which outpaced the Zacks Consensus Estimate by 6.6%. The bottom line grew 3.2% year over year.
CNC’s revenues of $35.9 billion advanced 11% year over year in the quarter under review and also beat the consensus mark by 1.1%. Our estimate for the metric stands at $35.3 billion.
Shares of Centene gained 3.6% in the pre-market trading session, courtesy of better-than-expected third-quarter results.
The quarterly results benefited from higher premiums owing to significant membership growth within Centene’s Medicare business. The acquisition of Magellan Health and organic Medicaid growth also contributed to the upside. However, the positives were partly offset by the divestiture of PANTHERx completed in July 2022 and elevated operating expenses.
Centene Corporation Price, Consensus and EPS Surprise
Revenues from Medicare surged 30% year over year in the third quarter. Revenues from Medicaid improved 8% year over year, while Commercial revenues declined 2% year over year.
Premiums of $31.8 billion rose 10.3% year over year in the quarter under review, while our estimate for the metric stands at $30.7 billion. Service revenues climbed 14.7% year over year to $1.9 billion.
As of Sep 30, 2022, total membership grew 4.5% year over year to 26.8 million, courtesy of Medicare and Medicaid businesses.
Health Benefits Ratio (HBR) deteriorated 20 basis points (bps) year over year to 88.3% in the third quarter. The metric was affected by a recovering normalized Medicaid utilization and worsened from the prior-year quarter’s level. However, the downside was partly offset by prudent pricing actions undertaken within the Marketplace business.
Net earnings of $740 million climbed 27.4% year over year.
Total operating expenses of $35.4 billion escalated 11.1% year over year in the quarter under review. Our estimate for the metric stands at $34.5 billion.
Selling, general and administrative (SG&A) expenses rose 12.2% year over year to $2.8 billion. Cost of services of $1.6 billion increased 15.9% year over year. Medical costs of $28.1 billion grew 10.5% in the quarter under review.
Adjusted SG&A expense ratio came in at 8.3%, which deteriorated 20 bps year over year. The metric suffered the inclusion of Magellan, divestiture of PANTHERx and expenses linked with Medicare marketing, partly offset by real estate savings.
Financial Update (as of Sep 30, 2022)
Centene exited the third quarter with cash and cash equivalents of $15 billion, which increased 14.2% from the 2021-end level. Total assets of $81.2 billion rose 3.6% from the figure at 2021 end.
Long-term debt amounted to $18.1 billion, down 2.6% from the level as of Dec 31, 2021. The current portion of long-term debt was $249 million.
Total stockholders’ equity of $25.5 billion slipped 5.2% from the 2021-end figure.
During the first nine months ended Sep 30, 2022, net operating cash flow of $7.8 billion more than doubled the prior-year comparable period’s number.
Repurchase Update
In the third quarter, Centene bought back 8.6 million shares as part of the accelerated share repurchase (ASR) agreement inked to utilize the proceeds of PANTHERx divestiture. Also, additional shares worth $240 million were bought back in the quarter under review. CNC had $2.2 billion left under the share buyback program as of Oct 25, 2022. Also, as of the same date, Centene’s debt buyback program had an available capacity of $700 million.
2022 Guidance
Management anticipates revenues within $142.7-$144.7 billion, up from the previous outlook of $141.6-$143.6 billion. The midpoint of the revised guidance indicates 14% growth from the 2021 figure.
Premium and service revenues are projected within $134-$136 billion for 2022, higher than the earlier view of $133.3-$135.3 billion.
Adjusted EPS is projected to be $5.65-$5.75 compared with the prior guidance of $5.60-$5.75. The midpoint of the altered guidance suggests a 10.7% improvement from the 2021 reported figure.
Diluted shares outstanding are anticipated within 582.5-585.5 million, down from the earlier view of 583-586 million.
Management maintains the guidance for the following metrics. HBR is estimated in the 87.6-88% band. Adjusted SG&A expense ratio is expected within 8-8.5% this year. It also expects an adjusted effective tax rate of 25.3-26.3%.
Of the Medical sector players that have reported third-quarter results so far, the bottom-line results of Intuitive Surgical, Inc. (ISRG - Free Report) , Elevance Health Inc. (ELV - Free Report) and HCA Healthcare, Inc. (HCA - Free Report) beat the respective Zacks Consensus Estimate.
Intuitive Surgical reported a third-quarter 2022 adjusted EPS of $1.19, which beat the Zacks Consensus Estimate of $1.16 per share by 8.2%. The bottom line was flat year over year. ISRG’s revenues of $1.56 billion climbed 11% from the prior-year quarter’s level. The top line also beat the Zacks Consensus Estimate by 2.6%. Revenues at the Instruments & Accessories segment totaled $871.6 million, reflecting a year-over-year improvement of 15.4%.
Elevance Health’s third-quarter 2022 earnings of $7.53 per share outpaced the Zacks Consensus Estimate of $7.10. The bottom line also improved 10.9% year over year. Operating revenues of ELV in the third quarter totaled $39,625 million, which rose 11.5% year over year. The top line also beat the consensus mark of $39,106 million. As of Sep 30, 2022, medical enrollment of ELV amounted to 47.3 million, which grew 4.9% year over year,
HCA Healthcare reported third-quarter 2022 adjusted earnings of $3.93 per share, which beat the Zacks Consensus Estimate by 1%. However, the bottom line dropped 14% year over year. Revenues of HCA decreased 2% year over year to $15 billion in the third quarter and missed the consensus mark by a whisker. Same-facility equivalent admissions rose 2.3% year over year in the third quarter, while same-facility admissions fell 1.5% year over year.
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Centene (CNC) Q3 Earnings Top on Medicaid Arm, Revenues Rise Y/Y
Centene Corporation (CNC - Free Report) reported third-quarter 2022 adjusted earnings per share (EPS) of $1.30, which outpaced the Zacks Consensus Estimate by 6.6%. The bottom line grew 3.2% year over year.
CNC’s revenues of $35.9 billion advanced 11% year over year in the quarter under review and also beat the consensus mark by 1.1%. Our estimate for the metric stands at $35.3 billion.
Shares of Centene gained 3.6% in the pre-market trading session, courtesy of better-than-expected third-quarter results.
The quarterly results benefited from higher premiums owing to significant membership growth within Centene’s Medicare business. The acquisition of Magellan Health and organic Medicaid growth also contributed to the upside. However, the positives were partly offset by the divestiture of PANTHERx completed in July 2022 and elevated operating expenses.
Centene Corporation Price, Consensus and EPS Surprise
Centene Corporation price-consensus-eps-surprise-chart | Centene Corporation Quote
Quarterly Operational Update
Revenues from Medicare surged 30% year over year in the third quarter. Revenues from Medicaid improved 8% year over year, while Commercial revenues declined 2% year over year.
Premiums of $31.8 billion rose 10.3% year over year in the quarter under review, while our estimate for the metric stands at $30.7 billion. Service revenues climbed 14.7% year over year to $1.9 billion.
As of Sep 30, 2022, total membership grew 4.5% year over year to 26.8 million, courtesy of Medicare and Medicaid businesses.
Health Benefits Ratio (HBR) deteriorated 20 basis points (bps) year over year to 88.3% in the third quarter. The metric was affected by a recovering normalized Medicaid utilization and worsened from the prior-year quarter’s level. However, the downside was partly offset by prudent pricing actions undertaken within the Marketplace business.
Net earnings of $740 million climbed 27.4% year over year.
Total operating expenses of $35.4 billion escalated 11.1% year over year in the quarter under review. Our estimate for the metric stands at $34.5 billion.
Selling, general and administrative (SG&A) expenses rose 12.2% year over year to $2.8 billion. Cost of services of $1.6 billion increased 15.9% year over year. Medical costs of $28.1 billion grew 10.5% in the quarter under review.
Adjusted SG&A expense ratio came in at 8.3%, which deteriorated 20 bps year over year. The metric suffered the inclusion of Magellan, divestiture of PANTHERx and expenses linked with Medicare marketing, partly offset by real estate savings.
Financial Update (as of Sep 30, 2022)
Centene exited the third quarter with cash and cash equivalents of $15 billion, which increased 14.2% from the 2021-end level. Total assets of $81.2 billion rose 3.6% from the figure at 2021 end.
Long-term debt amounted to $18.1 billion, down 2.6% from the level as of Dec 31, 2021. The current portion of long-term debt was $249 million.
Total stockholders’ equity of $25.5 billion slipped 5.2% from the 2021-end figure.
During the first nine months ended Sep 30, 2022, net operating cash flow of $7.8 billion more than doubled the prior-year comparable period’s number.
Repurchase Update
In the third quarter, Centene bought back 8.6 million shares as part of the accelerated share repurchase (ASR) agreement inked to utilize the proceeds of PANTHERx divestiture. Also, additional shares worth $240 million were bought back in the quarter under review. CNC had $2.2 billion left under the share buyback program as of Oct 25, 2022. Also, as of the same date, Centene’s debt buyback program had an available capacity of $700 million.
2022 Guidance
Management anticipates revenues within $142.7-$144.7 billion, up from the previous outlook of $141.6-$143.6 billion. The midpoint of the revised guidance indicates 14% growth from the 2021 figure.
Premium and service revenues are projected within $134-$136 billion for 2022, higher than the earlier view of $133.3-$135.3 billion.
Adjusted EPS is projected to be $5.65-$5.75 compared with the prior guidance of $5.60-$5.75. The midpoint of the altered guidance suggests a 10.7% improvement from the 2021 reported figure.
Diluted shares outstanding are anticipated within 582.5-585.5 million, down from the earlier view of 583-586 million.
Management maintains the guidance for the following metrics. HBR is estimated in the 87.6-88% band. Adjusted SG&A expense ratio is expected within 8-8.5% this year. It also expects an adjusted effective tax rate of 25.3-26.3%.
Zacks Rank
Centene carries a Zacks Rank #3 (Hold), currently. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Other Medical Sector Releases
Of the Medical sector players that have reported third-quarter results so far, the bottom-line results of Intuitive Surgical, Inc. (ISRG - Free Report) , Elevance Health Inc. (ELV - Free Report) and HCA Healthcare, Inc. (HCA - Free Report) beat the respective Zacks Consensus Estimate.
Intuitive Surgical reported a third-quarter 2022 adjusted EPS of $1.19, which beat the Zacks Consensus Estimate of $1.16 per share by 8.2%. The bottom line was flat year over year. ISRG’s revenues of $1.56 billion climbed 11% from the prior-year quarter’s level. The top line also beat the Zacks Consensus Estimate by 2.6%. Revenues at the Instruments & Accessories segment totaled $871.6 million, reflecting a year-over-year improvement of 15.4%.
Elevance Health’s third-quarter 2022 earnings of $7.53 per share outpaced the Zacks Consensus Estimate of $7.10. The bottom line also improved 10.9% year over year. Operating revenues of ELV in the third quarter totaled $39,625 million, which rose 11.5% year over year. The top line also beat the consensus mark of $39,106 million. As of Sep 30, 2022, medical enrollment of ELV amounted to 47.3 million, which grew 4.9% year over year,
HCA Healthcare reported third-quarter 2022 adjusted earnings of $3.93 per share, which beat the Zacks Consensus Estimate by 1%. However, the bottom line dropped 14% year over year. Revenues of HCA decreased 2% year over year to $15 billion in the third quarter and missed the consensus mark by a whisker. Same-facility equivalent admissions rose 2.3% year over year in the third quarter, while same-facility admissions fell 1.5% year over year.