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Centene (CNC) Q4 Earnings Beat on Membership Growth, View Up
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Centene Corporation (CNC - Free Report) reported fourth-quarter 2023 adjusted earnings per share (EPS) of 45 cents, which beat the Zacks Consensus Estimate by 4.7%. The bottom line declined 47.7% year over year.
Revenues of Centene amounted to $39.5 billion, which improved 11% year over year. The top line outpaced the consensus mark by 9.6%.
The better-than-expected quarterly results benefited from growing marketplace membership, business wins and commercial growth. However, the positives were partially offset by rising operating expenses and lower Medicaid membership because of redeterminations.
Centene Corporation Price, Consensus and EPS Surprise
Revenues from Medicaid declined 1% year over year to $21.1 billion, while Medicare revenues fell 3% year over year to $5.3 billion. Meanwhile, commercial revenues jumped 68% year over year to $7.4 billion.
Premiums of Centene improved 7.4% year over year to $34.2 billion, which beat our estimate of $32.6 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 declined 33.7% year over year in the quarter under review, narrower than our estimate of a decline of 40%.
The total membership of Centene was almost 27.5 million as of Dec 31, 2023, which increased 1.5% year over year but lagged our estimate of 27.8 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 89.5% for the fourth quarter of 2023 was higher than our estimate of 88.8% and the year-ago period’s 88.7%. The metric was affected by $250 million premium deficiency related to the Medicare Advantage business of 2024.
Centene reported adjusted net earnings of $240 million in the quarter under review, which declined from $485 million a year ago.
Total operating expenses of $39.7 billion increased 10.6% year over year and came above our estimate of $35.7 billion. Medical costs rose 8.4% year over year to $30.6 billion, higher than our estimate of $28.9 billion. Selling, general and administrative expenses (SG&A) of $3.5 billion escalated 9.1% year over year, above our estimate of $3.4 billion.
Adjusted SG&A expense ratio increased to 9.7% in the fourth quarter from 9.3% a year ago but came lower than our model estimate of 10.1%. The metric deteriorated due to an expanding Marketplace business and Medicare distribution costs.
Financial Update (as of Dec 31, 2023)
Centene exited the fourth quarter with cash and cash equivalents of $17.2 billion, which climbed from $12.1 billion at 2022-end. Total assets of $84.6 billion increased from $76.9 billion at 2022-end.
Long-term debt amounted to $17.7 billion, down slightly from $17.9 billion at 2022-end. The current portion of long-term debt amounted to $119 million.
Total stockholders’ equity of $25.9 billion grew from $24.2 billion at 2022-end.
In 2023, the operating cash flow of $8.1 billion increased 28.6% year over year.
Full-Year Update
Total revenues of $154 billion jumped 6.5% from 2022 levels, while adjusted EPS of $6.68 rose 15.6% year over year. Total operating expenses rose 5.5% in 2023 to $151.1 billion.
Share Repurchase Update
Centene bought back 397,000 shares worth $27 million in the fourth quarter. As of Feb 6, 2024, it had a leftover share buyback capacity of $5.2 billion.
Guidance Revised
Premium and service revenues are currently forecasted to be between $134.5 billion and $137.5 billion for 2024, higher than the prior outlook of $132-$135 billion. Last year, the metric was at $140.1 billion. Revenues are estimated to be between $142.5 billion and $145.5 billion, lower than the 2023 figure of $154 billion.
Management reaffirmed its adjusted EPS guidance to be a minimum of $6.70 in 2024, higher than the 2023 figure of $6.68 per share.
Centene expects the health benefits ratio to be in the range of 87.3-87.9% in 2024. Health Benefits ratio for 2023 was 87.7%. The company also estimates the adjusted SG&A expense ratio to be in the 8.4-9% range. It projects the adjusted effective tax rate to be within 24.1-25.1%.
Diluted shares outstanding are anticipated to be in the range of 522.2-525.2 million.
Of the Medical sector players that have reported fourth-quarter results so far, the bottom lines of Elevance Health, Inc. (ELV - Free Report) , UnitedHealth Group Incorporated (UNH - Free Report) and The Cigna Group (CI - Free Report) beat the Zacks Consensus Estimate.
Elevance Health reported fourth-quarter 2023 adjusted net income of $5.62 per share, which outpaced the Zacks Consensus Estimate by 1.3%. The bottom line improved 15.2% year over year.
ELV’s operating revenues, which amounted to $42.5 billion, rose 7% year over year in the fourth quarter. The top line surpassed the consensus mark by 1.5%.
UnitedHealth Group reported fourth-quarter 2023 adjusted EPS of $6.16, which outpaced the Zacks Consensus Estimate by 3%. The bottom line advanced 15.4% year over year.
Revenues improved 14.1% year over year to $94.4 billion in the fourth quarter, attributable to sound contributions made by the UnitedHealthcare and Optum business lines. The top line surpassed the consensus mark by 2.6%.
Cigna reported fourth-quarter 2023 adjusted EPS of $6.79, which outpaced the Zacks Consensus Estimate by 4.1%. The bottom line advanced 36.9% year over year.
CI’s operating revenues, which amounted to $51.1 billion, rose 12% year over year in the fourth quarter. The top line surpassed the consensus mark by 4.8%.
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Centene (CNC) Q4 Earnings Beat on Membership Growth, View Up
Centene Corporation (CNC - Free Report) reported fourth-quarter 2023 adjusted earnings per share (EPS) of 45 cents, which beat the Zacks Consensus Estimate by 4.7%. The bottom line declined 47.7% year over year.
Revenues of Centene amounted to $39.5 billion, which improved 11% year over year. The top line outpaced the consensus mark by 9.6%.
The better-than-expected quarterly results benefited from growing marketplace membership, business wins and commercial growth. However, the positives were partially offset by rising operating expenses and lower Medicaid membership because of redeterminations.
Centene Corporation Price, Consensus and EPS Surprise
Centene Corporation price-consensus-eps-surprise-chart | Centene Corporation Quote
Quarterly Operational Update
Revenues from Medicaid declined 1% year over year to $21.1 billion, while Medicare revenues fell 3% year over year to $5.3 billion. Meanwhile, commercial revenues jumped 68% year over year to $7.4 billion.
Premiums of Centene improved 7.4% year over year to $34.2 billion, which beat our estimate of $32.6 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 declined 33.7% year over year in the quarter under review, narrower than our estimate of a decline of 40%.
The total membership of Centene was almost 27.5 million as of Dec 31, 2023, which increased 1.5% year over year but lagged our estimate of 27.8 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 89.5% for the fourth quarter of 2023 was higher than our estimate of 88.8% and the year-ago period’s 88.7%. The metric was affected by $250 million premium deficiency related to the Medicare Advantage business of 2024.
Centene reported adjusted net earnings of $240 million in the quarter under review, which declined from $485 million a year ago.
Total operating expenses of $39.7 billion increased 10.6% year over year and came above our estimate of $35.7 billion. Medical costs rose 8.4% year over year to $30.6 billion, higher than our estimate of $28.9 billion. Selling, general and administrative expenses (SG&A) of $3.5 billion escalated 9.1% year over year, above our estimate of $3.4 billion.
Adjusted SG&A expense ratio increased to 9.7% in the fourth quarter from 9.3% a year ago but came lower than our model estimate of 10.1%. The metric deteriorated due to an expanding Marketplace business and Medicare distribution costs.
Financial Update (as of Dec 31, 2023)
Centene exited the fourth quarter with cash and cash equivalents of $17.2 billion, which climbed from $12.1 billion at 2022-end. Total assets of $84.6 billion increased from $76.9 billion at 2022-end.
Long-term debt amounted to $17.7 billion, down slightly from $17.9 billion at 2022-end. The current portion of long-term debt amounted to $119 million.
Total stockholders’ equity of $25.9 billion grew from $24.2 billion at 2022-end.
In 2023, the operating cash flow of $8.1 billion increased 28.6% year over year.
Full-Year Update
Total revenues of $154 billion jumped 6.5% from 2022 levels, while adjusted EPS of $6.68 rose 15.6% year over year. Total operating expenses rose 5.5% in 2023 to $151.1 billion.
Share Repurchase Update
Centene bought back 397,000 shares worth $27 million in the fourth quarter. As of Feb 6, 2024, it had a leftover share buyback capacity of $5.2 billion.
Guidance Revised
Premium and service revenues are currently forecasted to be between $134.5 billion and $137.5 billion for 2024, higher than the prior outlook of $132-$135 billion. Last year, the metric was at $140.1 billion. Revenues are estimated to be between $142.5 billion and $145.5 billion, lower than the 2023 figure of $154 billion.
Management reaffirmed its adjusted EPS guidance to be a minimum of $6.70 in 2024, higher than the 2023 figure of $6.68 per share.
Centene expects the health benefits ratio to be in the range of 87.3-87.9% in 2024. Health Benefits ratio for 2023 was 87.7%. The company also estimates the adjusted SG&A expense ratio to be in the 8.4-9% range. It projects the adjusted effective tax rate to be within 24.1-25.1%.
Diluted shares outstanding are anticipated to be in the range of 522.2-525.2 million.
Zacks Rank
Centene currently carries a Zacks Rank #2 (Buy). 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 fourth-quarter results so far, the bottom lines of Elevance Health, Inc. (ELV - Free Report) , UnitedHealth Group Incorporated (UNH - Free Report) and The Cigna Group (CI - Free Report) beat the Zacks Consensus Estimate.
Elevance Health reported fourth-quarter 2023 adjusted net income of $5.62 per share, which outpaced the Zacks Consensus Estimate by 1.3%. The bottom line improved 15.2% year over year.
ELV’s operating revenues, which amounted to $42.5 billion, rose 7% year over year in the fourth quarter. The top line surpassed the consensus mark by 1.5%.
UnitedHealth Group reported fourth-quarter 2023 adjusted EPS of $6.16, which outpaced the Zacks Consensus Estimate by 3%. The bottom line advanced 15.4% year over year.
Revenues improved 14.1% year over year to $94.4 billion in the fourth quarter, attributable to sound contributions made by the UnitedHealthcare and Optum business lines. The top line surpassed the consensus mark by 2.6%.
Cigna reported fourth-quarter 2023 adjusted EPS of $6.79, which outpaced the Zacks Consensus Estimate by 4.1%. The bottom line advanced 36.9% year over year.
CI’s operating revenues, which amounted to $51.1 billion, rose 12% year over year in the fourth quarter. The top line surpassed the consensus mark by 4.8%.