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Centene (CNC) Q3 Earnings Beat on Commercial Growth, View Raised
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Centene Corporation (CNC - Free Report) reported third-quarter 2023 adjusted earnings per share (EPS) of $2, which beat the Zacks Consensus Estimate by 26.6%. The bottom line advanced 53.8% year over year.
Revenues of Centene amounted to $38,042 million, which improved 6.1% year over year. The top line outpaced the consensus mark by 5.1%.
The strong third-quarter results benefited from growing marketplace membership, business wins and commercial growth. However, the positives were partially offset by rising operating expenses.
Centene Corporation Price, Consensus and EPS Surprise
Revenues from Medicaid rose 2% year over year to $21.6 billion, while Medicare revenues fell 4% year over year to $5.4 billion. Meanwhile, commercial revenues jumped 50% year over year to $6.5 billion.
Premiums of Centene improved 6.3% year over year to $33.9 billion, beating our estimate of $33.3 billion. It was propelled by membership growth in the Marketplace business, thanks to solid product positioning and growth in the overall market, partially counteracted by divestitures.
Service revenues of $1.1 billion dropped 41.4% year over year in the quarter under review, narrower than our estimate of a decline of 47%.
The total membership of Centene came in at almost 28 million as of Sep 30, 2023, which increased 4.5% year over year but lagged our estimate of 28.4 million. Commercial business memberships witnessed a massive increase in the quarter, offsetting the decline in Medicaid and Medicare memberships.
The Health Benefits Ratio (HBR) of 87% for the third quarter of 2023 was lower than our estimate of 87.5% and the year-ago period’s 88.3%. It signals lowering costs per premium.
Centene reported adjusted net earnings of $1,082 million in the quarter under review, which jumped from $755 million a year ago.
Total operating expenses of $37.3 billion increased 5.4% year over year and came above our estimate of $35.5 billion. Medical costs rose 4.9% year over year to $29.5 billion, higher than our estimate of $29.2 billion. Selling, general and administrative expenses (SG&A) of $3 billion escalated 7.1% year over year, above our estimate of $2.9 billion.
Adjusted SG&A expense ratio increased to 8.6% in the third quarter from 8.3% a year ago and came above our model estimate of 8.5%. The metric suffered a blow from an expanding Marketplace business.
Financial Update (as of Sep 30, 2023)
Centene exited the third quarter with cash and cash equivalents of $18.2 billion, which climbed from $12.1 billion at 2022-end. Total assets of $84.4 billion increased from $76.9 billion at 2022-end.
Long-term debt amounted to $17.89 billion, down slightly from $17.94 billion at 2022-end. The current portion of long-term debt amounted to $113 million.
Total stockholders’ equity of $25.4 billion grew from $24.2 billion at 2022-end.
In the reported quarter, the operating cash flow of $1 billion decreased 69.4% year over year.
Share Repurchase Update
Centene bought back 11.6 million shares worth $773 million in the third quarter. It bought back an additional 0.4 million shares for $27 million in October. As of Oct 24, 2023, it had a leftover share buyback capacity of $1.2 billion.
Guidance Revised
Premium and service revenues are currently forecasted to be between $137.5 billion and $139.5 billion, higher than the prior outlook of $137-$139 billion. Last year, the metric was at $135.5 billion. Revenues are estimated to be between $149 billion and $151 billion, up from the previous guidance of $147.3-$149.3 billion. The midpoint of the revised outlook implies a significant improvement from the 2022 figure of $144.5 billion.
Management anticipates adjusted EPS to register a minimum of $6.60 this year, while the earlier view called for the metric to be $6.45. The updated outlook suggests growth from the 2022 figure of $5.78 per share. Also, the management reiterated the adjusted EPS estimate to stay higher than $6.60 in 2024.
The company reaffirmed its previous guidance for the following metrics, HBR in the band of 87.1-87.7%, adjusted SG&A expense ratio within 8.7-9.1% and adjusted effective tax rate of 24.1-25.1%.
Diluted shares outstanding are anticipated to be in the range of 543.7-546.7 million.
The Zacks Consensus Estimate for Select Medical’s 2023 earnings indicates a 56.9% year-over-year increase to $1.93 per share. It has witnessed one upward estimate revision over the past 30 days against no movement in the opposite direction. The consensus mark for SEM’s 2023 revenues indicates 4.2% growth from a year ago.
The Zacks Consensus Estimate for Molina Healthcare’s 2023 bottom line is pegged at $20.79 per share, suggesting 16% year-over-year growth. It beat earnings estimates in all the last four quarters, with an average surprise of 7.2%. The consensus mark for MOH’s current year revenues indicates 3.4% growth from a year ago.
The Zacks Consensus Estimate for Acadia Healthcare’s current-year earnings implies a 13% increase from the year-ago reported figure. The consensus mark for its current year revenues indicates 10.5% growth from a year ago. ACHC beat earnings estimates in two of the last four quarters, met once and missed on one occasion, with an average surprise of 2.8%.
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Centene (CNC) Q3 Earnings Beat on Commercial Growth, View Raised
Centene Corporation (CNC - Free Report) reported third-quarter 2023 adjusted earnings per share (EPS) of $2, which beat the Zacks Consensus Estimate by 26.6%. The bottom line advanced 53.8% year over year.
Revenues of Centene amounted to $38,042 million, which improved 6.1% year over year. The top line outpaced the consensus mark by 5.1%.
The strong third-quarter results benefited from growing marketplace membership, business wins and commercial growth. However, the positives were partially offset by rising operating expenses.
Centene Corporation Price, Consensus and EPS Surprise
Centene Corporation price-consensus-eps-surprise-chart | Centene Corporation Quote
Quarterly Operational Update
Revenues from Medicaid rose 2% year over year to $21.6 billion, while Medicare revenues fell 4% year over year to $5.4 billion. Meanwhile, commercial revenues jumped 50% year over year to $6.5 billion.
Premiums of Centene improved 6.3% year over year to $33.9 billion, beating our estimate of $33.3 billion. It was propelled by membership growth in the Marketplace business, thanks to solid product positioning and growth in the overall market, partially counteracted by divestitures.
Service revenues of $1.1 billion dropped 41.4% year over year in the quarter under review, narrower than our estimate of a decline of 47%.
The total membership of Centene came in at almost 28 million as of Sep 30, 2023, which increased 4.5% year over year but lagged our estimate of 28.4 million. Commercial business memberships witnessed a massive increase in the quarter, offsetting the decline in Medicaid and Medicare memberships.
The Health Benefits Ratio (HBR) of 87% for the third quarter of 2023 was lower than our estimate of 87.5% and the year-ago period’s 88.3%. It signals lowering costs per premium.
Centene reported adjusted net earnings of $1,082 million in the quarter under review, which jumped from $755 million a year ago.
Total operating expenses of $37.3 billion increased 5.4% year over year and came above our estimate of $35.5 billion. Medical costs rose 4.9% year over year to $29.5 billion, higher than our estimate of $29.2 billion. Selling, general and administrative expenses (SG&A) of $3 billion escalated 7.1% year over year, above our estimate of $2.9 billion.
Adjusted SG&A expense ratio increased to 8.6% in the third quarter from 8.3% a year ago and came above our model estimate of 8.5%. The metric suffered a blow from an expanding Marketplace business.
Financial Update (as of Sep 30, 2023)
Centene exited the third quarter with cash and cash equivalents of $18.2 billion, which climbed from $12.1 billion at 2022-end. Total assets of $84.4 billion increased from $76.9 billion at 2022-end.
Long-term debt amounted to $17.89 billion, down slightly from $17.94 billion at 2022-end. The current portion of long-term debt amounted to $113 million.
Total stockholders’ equity of $25.4 billion grew from $24.2 billion at 2022-end.
In the reported quarter, the operating cash flow of $1 billion decreased 69.4% year over year.
Share Repurchase Update
Centene bought back 11.6 million shares worth $773 million in the third quarter. It bought back an additional 0.4 million shares for $27 million in October. As of Oct 24, 2023, it had a leftover share buyback capacity of $1.2 billion.
Guidance Revised
Premium and service revenues are currently forecasted to be between $137.5 billion and $139.5 billion, higher than the prior outlook of $137-$139 billion. Last year, the metric was at $135.5 billion. Revenues are estimated to be between $149 billion and $151 billion, up from the previous guidance of $147.3-$149.3 billion. The midpoint of the revised outlook implies a significant improvement from the 2022 figure of $144.5 billion.
Management anticipates adjusted EPS to register a minimum of $6.60 this year, while the earlier view called for the metric to be $6.45. The updated outlook suggests growth from the 2022 figure of $5.78 per share. Also, the management reiterated the adjusted EPS estimate to stay higher than $6.60 in 2024.
The company reaffirmed its previous guidance for the following metrics, HBR in the band of 87.1-87.7%, adjusted SG&A expense ratio within 8.7-9.1% and adjusted effective tax rate of 24.1-25.1%.
Diluted shares outstanding are anticipated to be in the range of 543.7-546.7 million.
Zacks Rank & Key Picks
Centene currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader Medical space are Select Medical Holdings Corporation (SEM - Free Report) , Molina Healthcare, Inc. (MOH - Free Report) and Acadia Healthcare Company, Inc. (ACHC - 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 2023 earnings indicates a 56.9% year-over-year increase to $1.93 per share. It has witnessed one upward estimate revision over the past 30 days against no movement in the opposite direction. The consensus mark for SEM’s 2023 revenues indicates 4.2% growth from a year ago.
The Zacks Consensus Estimate for Molina Healthcare’s 2023 bottom line is pegged at $20.79 per share, suggesting 16% year-over-year growth. It beat earnings estimates in all the last four quarters, with an average surprise of 7.2%. The consensus mark for MOH’s current year revenues indicates 3.4% growth from a year ago.
The Zacks Consensus Estimate for Acadia Healthcare’s current-year earnings implies a 13% increase from the year-ago reported figure. The consensus mark for its current year revenues indicates 10.5% growth from a year ago. ACHC beat earnings estimates in two of the last four quarters, met once and missed on one occasion, with an average surprise of 2.8%.