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Here's Why You Should Retain Centene (CNC) in Your Portfolio
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Centene Corporation’s (CNC - Free Report) growing top line, improving medical membership, pursuit of buyouts, numerous contract wins and continued data-driven innovation make it worth retaining in one’s portfolio. Also, its favorable growth estimates are confidence boosters for investors.
The company is one of the largest Medicaid health insurers in the United States, catering to 16 million Medicaid recipients in 29 states as of 2022-end. CNC provides access to high-quality healthcare, health solutions and innovative programs that help families stay healthy.
Zacks Rank & Price Performance
Centene currently carries a Zacks Rank #3 (Hold). In the past month, the stock has gained 3.4% compared with the industry’s growth of 11%.
Image Source: Zacks Investment Research
Earnings Projections & Surprise History
The Zacks Consensus Estimate for CNC’s 2023 earnings is pegged at $6.34 per share, indicating a 9.7% increase from the year-ago reported figure of $5.78. The same for 2024 earnings is pegged at $7.16 per share, suggesting a 12.9% rise from the year-ago reported figure.
The company beat earnings estimates in three of the past four quarters and missed on the other occasion, the average surprise being 4.2%.
Growth Drivers
Centene has witnessed consistent and significant revenue growth for the past few years. Its total revenues increased 15% to $144.5 million in 2022 due to Medicaid membership growth, several acquisitions, growth in the Medicare business and expansion into new states. The figure is expected to increase as the company continues to grow its operations organically and inorganically through buyouts.
CNC does not shy away from grabbing opportunities to grow inorganically through buyouts and partnerships. The company acquired Magellan in 2022, enhancing its Behavioral Health business, going forward. CNC also partnered with Evolent Health, strengthening the specialty care partnership. With reduced worries of administration, payers can focus on providing services at the right time and better-serving consumers to navigate and get the necessary care.
Centene specializes in providing health services to Medicaid and Medicare recipients. Its total membership increased 5% to 27.1 billion in 2022. Centers for Medicare & Medicaid Services estimates the total Medicaid market to grow $1.1 trillion by 2029. In addition, Medicaid spending is expected to increase 5.6% annually through 2031. Centene is a managed care organization, with a significant market opportunity in this space. Its revenues will increase in the future due to more Medicaid and Medicare-related expenditure by the government.
Centene is expanding into new markets through numerous contract wins. Successful procurements and expansion programs in Louisiana, Texas, Nebraska and Missouri bolstered the company’s market reach and leadership stance. CNC will start serving in California from the beginning of 2024 and will strengthen its relationship with the state. All these moves will fuel growth in the forms of more premium and service revenues in the future.
CNC is executing its value-creation plan well, which aims to drive margin expansion by generating profitable growth. The company closed a multi-year contract with Express Scripts to manage pharmacy benefits for 20 million Centene members. This is a milestone achieved under the value creation plan, which positions it to generate significant value for shareholders.
CNC also believes in streamlining its business to focus on its core areas. The company completed the divestitures of PANTHERx Rare, the Spanish and Central European businesses and Magellan Rx. It divested Magellan Specialty Health, Centurion and HealthSmart early this year. Disciplined executions like this will result in reduced distraction and better performance in the future.
Moreover, the company strives to achieve Selling, General & Administrative (SG&A) expense savings, gross margin expansion and strategic capital management, which poise the company well for growth. The company manages its excess capital through share repurchases and debt repayment. It bought back shares worth $3.3 billion in 2022. Centene also focuses on reducing financial leverage by repaying its debts. CNC’s total debt at 2022-end decreased $800 million from 2021-end. This should instill confidence in shareholders.
The company has a VGM score of A.
Key Concerns
There are a few factors that have been impeding the stock’s growth lately.
CNC’s total expenses rose 15.3% in 2022 due to higher medical costs and costs of services. Rising costs can trim its margins.
Centene’s return on equity (ROE) undermines its growth potential. The company’s trailing 12-month ROE of 13% compares unfavorably with the industry average of 24.6%, indicating that it is less efficient in utilizing its shareholders’ funds. Nevertheless, we believe that a systematic and strategic plan of action will drive growth in the long term.
The Zacks Consensus Estimate for ICON's 2023 earnings indicates 7.7% year-over-year growth. The Zacks Consensus Estimate for ICLR’s 2023 earnings has moved 1% north in the past 60 days.
The Zacks Consensus Estimate for Alcon's 2023 earnings suggests 15.2% year-over-year growth. The Zacks Consensus Estimate for ALC’s 2023 earnings has moved 0.8% north in the past 30 days.
The Zacks Consensus Estimate for Embecta's 2024 earnings implies 10.1% year-over-year growth. The Zacks Consensus Estimate for EMBC’s 2023 earnings has moved 22.6% north in the past 60 days.
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Here's Why You Should Retain Centene (CNC) in Your Portfolio
Centene Corporation’s (CNC - Free Report) growing top line, improving medical membership, pursuit of buyouts, numerous contract wins and continued data-driven innovation make it worth retaining in one’s portfolio. Also, its favorable growth estimates are confidence boosters for investors.
The company is one of the largest Medicaid health insurers in the United States, catering to 16 million Medicaid recipients in 29 states as of 2022-end. CNC provides access to high-quality healthcare, health solutions and innovative programs that help families stay healthy.
Zacks Rank & Price Performance
Centene currently carries a Zacks Rank #3 (Hold). In the past month, the stock has gained 3.4% compared with the industry’s growth of 11%.
Image Source: Zacks Investment Research
Earnings Projections & Surprise History
The Zacks Consensus Estimate for CNC’s 2023 earnings is pegged at $6.34 per share, indicating a 9.7% increase from the year-ago reported figure of $5.78. The same for 2024 earnings is pegged at $7.16 per share, suggesting a 12.9% rise from the year-ago reported figure.
The company beat earnings estimates in three of the past four quarters and missed on the other occasion, the average surprise being 4.2%.
Growth Drivers
Centene has witnessed consistent and significant revenue growth for the past few years. Its total revenues increased 15% to $144.5 million in 2022 due to Medicaid membership growth, several acquisitions, growth in the Medicare business and expansion into new states. The figure is expected to increase as the company continues to grow its operations organically and inorganically through buyouts.
CNC does not shy away from grabbing opportunities to grow inorganically through buyouts and partnerships. The company acquired Magellan in 2022, enhancing its Behavioral Health business, going forward. CNC also partnered with Evolent Health, strengthening the specialty care partnership. With reduced worries of administration, payers can focus on providing services at the right time and better-serving consumers to navigate and get the necessary care.
Centene specializes in providing health services to Medicaid and Medicare recipients. Its total membership increased 5% to 27.1 billion in 2022. Centers for Medicare & Medicaid Services estimates the total Medicaid market to grow $1.1 trillion by 2029. In addition, Medicaid spending is expected to increase 5.6% annually through 2031. Centene is a managed care organization, with a significant market opportunity in this space. Its revenues will increase in the future due to more Medicaid and Medicare-related expenditure by the government.
Centene is expanding into new markets through numerous contract wins. Successful procurements and expansion programs in Louisiana, Texas, Nebraska and Missouri bolstered the company’s market reach and leadership stance. CNC will start serving in California from the beginning of 2024 and will strengthen its relationship with the state. All these moves will fuel growth in the forms of more premium and service revenues in the future.
CNC is executing its value-creation plan well, which aims to drive margin expansion by generating profitable growth. The company closed a multi-year contract with Express Scripts to manage pharmacy benefits for 20 million Centene members. This is a milestone achieved under the value creation plan, which positions it to generate significant value for shareholders.
CNC also believes in streamlining its business to focus on its core areas. The company completed the divestitures of PANTHERx Rare, the Spanish and Central European businesses and Magellan Rx. It divested Magellan Specialty Health, Centurion and HealthSmart early this year. Disciplined executions like this will result in reduced distraction and better performance in the future.
Moreover, the company strives to achieve Selling, General & Administrative (SG&A) expense savings, gross margin expansion and strategic capital management, which poise the company well for growth. The company manages its excess capital through share repurchases and debt repayment. It bought back shares worth $3.3 billion in 2022. Centene also focuses on reducing financial leverage by repaying its debts. CNC’s total debt at 2022-end decreased $800 million from 2021-end. This should instill confidence in shareholders.
The company has a VGM score of A.
Key Concerns
There are a few factors that have been impeding the stock’s growth lately.
CNC’s total expenses rose 15.3% in 2022 due to higher medical costs and costs of services. Rising costs can trim its margins.
Centene’s return on equity (ROE) undermines its growth potential. The company’s trailing 12-month ROE of 13% compares unfavorably with the industry average of 24.6%, indicating that it is less efficient in utilizing its shareholders’ funds. Nevertheless, we believe that a systematic and strategic plan of action will drive growth in the long term.
Stocks to Consider
Some better-ranked stocks from the broader medical space are ICON Public Limited Company (ICLR - Free Report) , Alcon Inc. (ALC - Free Report) and Embecta Corp. (EMBC - Free Report) . ICON sports a Zacks Rank #1 (Strong Buy), while Alcon and Embecta carry a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for ICON's 2023 earnings indicates 7.7% year-over-year growth. The Zacks Consensus Estimate for ICLR’s 2023 earnings has moved 1% north in the past 60 days.
The Zacks Consensus Estimate for Alcon's 2023 earnings suggests 15.2% year-over-year growth. The Zacks Consensus Estimate for ALC’s 2023 earnings has moved 0.8% north in the past 30 days.
The Zacks Consensus Estimate for Embecta's 2024 earnings implies 10.1% year-over-year growth. The Zacks Consensus Estimate for EMBC’s 2023 earnings has moved 22.6% north in the past 60 days.