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Will High Medical Costs Affect Centene's (CNC) Q4 Earnings?
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Centene Corporation (CNC - Free Report) is set to report its fourth-quarter 2023 results on Feb 6, before the opening bell.
What Do the Estimates Say?
The Zacks Consensus Estimate for fourth-quarter earnings per share of 43 cents suggests a 50% decrease from the prior-year figure of 86 cents. The consensus mark remained stable over the past week. The consensus estimate for fourth-quarter revenues of $36 billion indicates a 1.2% increase from the year-ago reported figure.
Centene beat the consensus estimate for earnings in two of the prior four quarters and missed twice, with the average surprise being 5.6%. This is depicted in the graph below:
Before we get into what to expect for the to-be-reported quarter in detail, it’s worth taking a look at CNC’s previous-quarter performance first.
Q3 Earnings Rewind
In the last reported quarter, the leading healthcare company reported adjusted earnings per share of $2, beating the Zacks Consensus Estimate by 26.6%, thanks to growing marketplace membership, business wins and commercial growth. However, the positives were partially offset by rising operating expenses.
Centene's fourth-quarter performance is expected to have benefited from enhanced volumes and contributions from its Commercial business. The positives are expected to have been amplified by higher premiums, expansions, the launch of new programs across different states and growth in memberships.
Medical memberships of the company have been rising over the past several quarters on contract wins and expansion across different regions, and the momentum is expected to have continued in the fourth quarter. The Zacks Consensus Estimate for overall membership growth is pegged at 2.1%, whereas our estimate suggests a 2.6% increase.
Centene’s performance is expected to have received a boost from its membership growth in the Commercial Marketplace business, as well as High Acuity Medicaid growth. Both the Zacks Consensus Estimate and our model estimate for the company’s premiums indicate a more than 2% improvement from the prior-year reported level of $31.9 billion.
The above-mentioned factors are expected to have boosted its top line in the fourth quarter. Further, the falling cost of services in the quarter under review is likely to have aided the bottom line. Our estimate for the metric suggests a 28% year-over-year decline.
However, the consensus estimate for service revenues indicates a more than 35% fall from the year-ago quarter’s $1.7 billion, while our estimate suggests a 40% slump. The Zacks Consensus Estimate for the company’s investment and other income indicates more than 38% year-over-year decline from $493 million, whereas our model predicts an almost 25% decrease.
Moreover, with seniors resuming elective procedures following the pause during the pandemic, CNC’s medical costs are expected to have jumped significantly in the fourth quarter. This is expected to have resulted in a year-over-year decline in profit levels, making an earnings beat uncertain. We expect the medical costs to be more than 81% of its total revenues in the fourth quarter.
Earnings Whispers
Our proven model does not conclusively predict an earnings beat for Centene this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. That is not the case here, as you will see below.
Earnings ESP: The company’s Earnings ESP is -11.38%. This is because the Most Accurate Estimate currently stands at 38 cents per share, lower than the Zacks Consensus Estimate of 43 cents.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Centene currently carries a Zacks Rank #2.
Stocks to Consider
While an earnings beat looks uncertain for Centene, here are some companies from the broader Medical space that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this time around:
The Zacks Consensus Estimate for GoodRx’s bottom line for the to-be-reported quarter is pegged at 7 cents per share, which has remained stable over the past week. The consensus mark for GDRX’s revenues is pegged at $193.3 million, signaling 5% year-over-year growth.
Globus Medical, Inc. (GMED - Free Report) has an Earnings ESP of +1.85% and a Zacks Rank #3.
The Zacks Consensus Estimate for Globus Medical’s bottom line for the to-be-reported quarter is pegged at 59 cents per share, which has witnessed four upward revisions over the past month against none in the opposite direction. GMED beat earnings estimates in each of the past four quarters, with an average surprise of 5.4%.
Arvinas, Inc. (ARVN - Free Report) has an Earnings ESP of +17.19% and is a Zacks #1 Ranked player.
The Zacks Consensus Estimate for Arvinas’ earnings per share for the to-be-reported quarter indicates an 18% year-over-year improvement. ARVN beat earnings estimates in two of the past four quarters and missed on the other occasions.
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Will High Medical Costs Affect Centene's (CNC) Q4 Earnings?
Centene Corporation (CNC - Free Report) is set to report its fourth-quarter 2023 results on Feb 6, before the opening bell.
What Do the Estimates Say?
The Zacks Consensus Estimate for fourth-quarter earnings per share of 43 cents suggests a 50% decrease from the prior-year figure of 86 cents. The consensus mark remained stable over the past week. The consensus estimate for fourth-quarter revenues of $36 billion indicates a 1.2% increase from the year-ago reported figure.
Centene beat the consensus estimate for earnings in two of the prior four quarters and missed twice, with the average surprise being 5.6%. This is depicted in the graph below:
Centene Corporation Price and EPS Surprise
Centene Corporation price-eps-surprise | Centene Corporation Quote
Before we get into what to expect for the to-be-reported quarter in detail, it’s worth taking a look at CNC’s previous-quarter performance first.
Q3 Earnings Rewind
In the last reported quarter, the leading healthcare company reported adjusted earnings per share of $2, beating the Zacks Consensus Estimate by 26.6%, thanks to growing marketplace membership, business wins and commercial growth. However, the positives were partially offset by rising operating expenses.
Now, let’s see how things have shaped up before the fourth-quarter earnings announcement.
Q4 Factors to Note
Centene's fourth-quarter performance is expected to have benefited from enhanced volumes and contributions from its Commercial business. The positives are expected to have been amplified by higher premiums, expansions, the launch of new programs across different states and growth in memberships.
Medical memberships of the company have been rising over the past several quarters on contract wins and expansion across different regions, and the momentum is expected to have continued in the fourth quarter. The Zacks Consensus Estimate for overall membership growth is pegged at 2.1%, whereas our estimate suggests a 2.6% increase.
Centene’s performance is expected to have received a boost from its membership growth in the Commercial Marketplace business, as well as High Acuity Medicaid growth. Both the Zacks Consensus Estimate and our model estimate for the company’s premiums indicate a more than 2% improvement from the prior-year reported level of $31.9 billion.
The above-mentioned factors are expected to have boosted its top line in the fourth quarter. Further, the falling cost of services in the quarter under review is likely to have aided the bottom line. Our estimate for the metric suggests a 28% year-over-year decline.
However, the consensus estimate for service revenues indicates a more than 35% fall from the year-ago quarter’s $1.7 billion, while our estimate suggests a 40% slump. The Zacks Consensus Estimate for the company’s investment and other income indicates more than 38% year-over-year decline from $493 million, whereas our model predicts an almost 25% decrease.
Moreover, with seniors resuming elective procedures following the pause during the pandemic, CNC’s medical costs are expected to have jumped significantly in the fourth quarter. This is expected to have resulted in a year-over-year decline in profit levels, making an earnings beat uncertain. We expect the medical costs to be more than 81% of its total revenues in the fourth quarter.
Earnings Whispers
Our proven model does not conclusively predict an earnings beat for Centene this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. That is not the case here, as you will see below.
Earnings ESP: The company’s Earnings ESP is -11.38%. This is because the Most Accurate Estimate currently stands at 38 cents per share, lower than the Zacks Consensus Estimate of 43 cents.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Centene currently carries a Zacks Rank #2.
Stocks to Consider
While an earnings beat looks uncertain for Centene, here are some companies from the broader Medical space that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this time around:
GoodRx Holdings, Inc. (GDRX - Free Report) has an Earnings ESP of +15.91% and is a Zacks #2 Ranked player. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for GoodRx’s bottom line for the to-be-reported quarter is pegged at 7 cents per share, which has remained stable over the past week. The consensus mark for GDRX’s revenues is pegged at $193.3 million, signaling 5% year-over-year growth.
Globus Medical, Inc. (GMED - Free Report) has an Earnings ESP of +1.85% and a Zacks Rank #3.
The Zacks Consensus Estimate for Globus Medical’s bottom line for the to-be-reported quarter is pegged at 59 cents per share, which has witnessed four upward revisions over the past month against none in the opposite direction. GMED beat earnings estimates in each of the past four quarters, with an average surprise of 5.4%.
Arvinas, Inc. (ARVN - Free Report) has an Earnings ESP of +17.19% and is a Zacks #1 Ranked player.
The Zacks Consensus Estimate for Arvinas’ earnings per share for the to-be-reported quarter indicates an 18% year-over-year improvement. ARVN beat earnings estimates in two of the past four quarters and missed on the other occasions.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.