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Centene Q3 Earnings Beat on Growth in Marketplace Business Line
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Centene Corporation (CNC - Free Report) reported third-quarter 2024 adjusted earnings per share (EPS) of $1.62, which outpaced the Zacks Consensus Estimate by 16.6%. However, the bottom line fell 19% year over year.
Revenues were $42 billion, which advanced 10.5% year over year. The top line surpassed the consensus mark by 10.9%.
Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.
The quarterly performance benefited on the back of strong Commercial revenue growth, expansion of the Marketplace business and rising premiums. However, the upside was partly offset by a decline in Medicaid and Medicare membership, elevated operating expenses, and a deteriorating Health Benefits Ratio (HBR), which weighed on profitability despite revenue gains.
Centene Corporation Price, Consensus and EPS Surprise
Revenues from Medicaid dipped 1% year over year to $21.3 billion, while Medicare revenues grew 4% year over year to $5.6 billion. Additionally, commercial revenues of $8.7 billion climbed 35% year over year.
Premiums of Centene amounted to $36.1 billion, which advanced 6.6% year over year on the back of Medicaid rate increases and higher membership in the Marketplace business, supported by strong product positioning and overall market expansion. The metric beat the Zacks Consensus Estimate of $33.8 billion and our estimate of $33.7 billion.
Service revenues dropped 28.8% year over year to $784 million, lower than the consensus mark of $833.4 million and our estimate of $877 million. Investment and other income of $432 million more than doubled year over year, and beat the consensus mark of $422.4 million but fell short of our estimate of $465.5 million.
As of Sept. 30, 2024, total membership was 28.6 million, which grew 2.4% year over year, and beat the Zacks Consensus Estimate of 28.4 million and our estimate of 28.5 million. Membership in the Commercial Marketplace business witnessed a significant year-over-year increase, partly offset by declines in the Medicaid and Medicare businesses.
Centene’s HBR deteriorated 220 basis points year over year to 89.2%.
Adjusted net earnings of $849 million tumbled 21.5% year over year.
Total operating expenses escalated nearly 11% year over year to $41.4 billion, surpassing our estimate of $37.2 billion. The increase was mainly due to higher medical costs and premium tax expenses. The two expense components escalated 9.2% and 61.4%, respectively, on a year-over-year basis.
Adjusted SG&A expense ratio of 8.3% improved 30 basis points year over year, attributable to the divestiture of Circle Health Group, which had a higher SG&A expense ratio, along with ongoing leveraging of costs over increased revenues.
CNC’s Financial Update (As of Sept. 30, 2024)
Centene exited the third quarter with cash and cash equivalents of $14.6 billion, which declined 15.2% from the 2023-end level.
Total assets of $82.4 billion slipped 2.7% from the figure at 2023-end.
Long-term debt amounted to $17.5 billion, down 1.2% from the figure as of Dec. 31, 2023. The current portion of long-term debt totaled $111 million.
Total stockholders’ equity of $27.4 billion rose 5.6% from the 2023-end figure.
Centene generated $741 million of net cash from operations in the first nine months of 2024, which declined nearly 11-fold from the prior-year period.
Centene’s Share Repurchase Update
Centene bought back common shares worth $1.2 billion in the third quarter. In October 2024, it further repurchased additional shares for $380 million. A leftover capacity of $2.8 billion remained under the company’s share repurchase authorization as of Oct. 25, 2024.
CNC’s 2024 Guidance Updated
Management projects premium and service revenues of $143.5-$144.5 billion, up from the prior guidance of $141-$143 billion. The midpoint of the updated outlook indicates growth of 2.8% from the 2023 figure.
Revenues are estimated between $159 billion and $161 billion, higher than the earlier view of $155-$157 billion. The midpoint of the revised guidance indicates 3.9% growth from the 2023 figure.
Adjusted EPS is expected to be greater than $6.80, which indicates a 1.8% rise from the 2023 reported figure. GAAP EPS is expected to remain greater than $5.92, while the prior view called for the metric to stay greater than $5.94.
HBR is estimated to be 88.3-88.5%. Adjusted SG&A expense ratio is expected to be 8.5-8.7%. Adjusted effective tax rate is anticipated to be 24-24.5%.
Shares outstanding continue to be anticipated between 522.2 million and 525.2 million.
Of the Medical sector players that have reported third-quarter 2024 results so far, the bottom-line results of UnitedHealth Group Incorporated (UNH - Free Report) , Molina Healthcare, Inc. (MOH - Free Report) and Intuitive Surgical, Inc. (ISRG - Free Report) beat the Zacks Consensus Estimate.
UnitedHealth Group reported third-quarter adjusted EPS of $7.15, which surpassed the Zacks Consensus Estimate by 1.9%. The bottom line advanced 9% year over year. Revenues rose 9.1% year over year to $100.8 billion. The top line beat the consensus mark by 1.3%. Its medical care ratio was 85.2%, which deteriorated 290 basis points (bps) year over year. UNH’s operating earnings grew 2.4% year over year to $8.7 billion. However, the net margin deteriorated 30 bps year over year to 6%.
Revenues of the health benefits business of UnitedHealth, UnitedHealthcare, advanced 7.2% year over year to $74.9 billion. Earnings from operations amounted to $4.2 billion , down 8.7% year over year. Revenues in the Optum business line were $63.9 billion, which rose 12.7% year over year. Optum’s earnings from operations climbed 15.4% year over year to $4.5 billion. The UnitedHealthcare business catered to 50.7 million people as of Sept. 30, 2024, which fell 4% year over year.
Molina Healthcare’s third-quarter adjusted EPS of $6.01 beat the Zacks Consensus Estimate of $5.96. Also, the bottom line grew 19% from the year-ago period. Total revenues amounted to $10.3 billion, which improved 20.9% year over year. Also, the top line outpaced the consensus mark by 3.8%. Premium revenues of $9.7 billion increased 18% year over year.
As of Sept. 30, 2024, total membership improved 8% year over year to around 5.6 million. Investment income rose 5.4% year over year to $118 million and beat the consensus mark of $117.1 million. The consolidated medical care, or MCR, was 89.2% . The metric rose from 88.7% a year ago. Molina Healthcare’s adjusted net income increased 18% year over year to $347 million.
Intuitive Surgical reported third-quarter adjusted EPS of $1.84, which beat the Zacks Consensus Estimate of $1.65 by 11.5%. The bottom line improved 26% year over year. The company reported revenues of $2.04 billion, up 17% from the prior-year quarter’s number, on a reported as well as constant currency basis. The top line also beat the Zacks Consensus Estimate by 1.2%. Revenues from the Instruments & Accessories segment totaled $1.26 billion, indicating a year-over-year improvement of 18%.
The Systems segment’s revenues totaled $445 million, up 17.4% year over year. Intuitive Surgical shipped 341 da Vinci Surgical Systems compared with 379 in the prior-year quarter. Revenues from the Services segment amounted to $328.9 million, up 3.7% from the year-ago quarter’s level. Adjusted gross profit was $1.41 billion, up 17.3% year over year. Adjusted operating income totaled $754.9 million, up 21% year over year.
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Centene Q3 Earnings Beat on Growth in Marketplace Business Line
Centene Corporation (CNC - Free Report) reported third-quarter 2024 adjusted earnings per share (EPS) of $1.62, which outpaced the Zacks Consensus Estimate by 16.6%. However, the bottom line fell 19% year over year.
Revenues were $42 billion, which advanced 10.5% year over year. The top line surpassed the consensus mark by 10.9%.
Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.
The quarterly performance benefited on the back of strong Commercial revenue growth, expansion of the Marketplace business and rising premiums. However, the upside was partly offset by a decline in Medicaid and Medicare membership, elevated operating expenses, and a deteriorating Health Benefits Ratio (HBR), which weighed on profitability despite revenue gains.
Centene Corporation Price, Consensus and EPS Surprise
Centene Corporation price-consensus-eps-surprise-chart | Centene Corporation Quote
Quarterly Operational Update of CNC
Revenues from Medicaid dipped 1% year over year to $21.3 billion, while Medicare revenues grew 4% year over year to $5.6 billion. Additionally, commercial revenues of $8.7 billion climbed 35% year over year.
Premiums of Centene amounted to $36.1 billion, which advanced 6.6% year over year on the back of Medicaid rate increases and higher membership in the Marketplace business, supported by strong product positioning and overall market expansion. The metric beat the Zacks Consensus Estimate of $33.8 billion and our estimate of $33.7 billion.
Service revenues dropped 28.8% year over year to $784 million, lower than the consensus mark of $833.4 million and our estimate of $877 million. Investment and other income of $432 million more than doubled year over year, and beat the consensus mark of $422.4 million but fell short of our estimate of $465.5 million.
As of Sept. 30, 2024, total membership was 28.6 million, which grew 2.4% year over year, and beat the Zacks Consensus Estimate of 28.4 million and our estimate of 28.5 million. Membership in the Commercial Marketplace business witnessed a significant year-over-year increase, partly offset by declines in the Medicaid and Medicare businesses.
Centene’s HBR deteriorated 220 basis points year over year to 89.2%.
Adjusted net earnings of $849 million tumbled 21.5% year over year.
Total operating expenses escalated nearly 11% year over year to $41.4 billion, surpassing our estimate of $37.2 billion. The increase was mainly due to higher medical costs and premium tax expenses. The two expense components escalated 9.2% and 61.4%, respectively, on a year-over-year basis.
Adjusted SG&A expense ratio of 8.3% improved 30 basis points year over year, attributable to the divestiture of Circle Health Group, which had a higher SG&A expense ratio, along with ongoing leveraging of costs over increased revenues.
CNC’s Financial Update (As of Sept. 30, 2024)
Centene exited the third quarter with cash and cash equivalents of $14.6 billion, which declined 15.2% from the 2023-end level.
Total assets of $82.4 billion slipped 2.7% from the figure at 2023-end.
Long-term debt amounted to $17.5 billion, down 1.2% from the figure as of Dec. 31, 2023. The current portion of long-term debt totaled $111 million.
Total stockholders’ equity of $27.4 billion rose 5.6% from the 2023-end figure.
Centene generated $741 million of net cash from operations in the first nine months of 2024, which declined nearly 11-fold from the prior-year period.
Centene’s Share Repurchase Update
Centene bought back common shares worth $1.2 billion in the third quarter. In October 2024, it further repurchased additional shares for $380 million. A leftover capacity of $2.8 billion remained under the company’s share repurchase authorization as of Oct. 25, 2024.
CNC’s 2024 Guidance Updated
Management projects premium and service revenues of $143.5-$144.5 billion, up from the prior guidance of $141-$143 billion. The midpoint of the updated outlook indicates growth of 2.8% from the 2023 figure.
Revenues are estimated between $159 billion and $161 billion, higher than the earlier view of $155-$157 billion. The midpoint of the revised guidance indicates 3.9% growth from the 2023 figure.
Adjusted EPS is expected to be greater than $6.80, which indicates a 1.8% rise from the 2023 reported figure. GAAP EPS is expected to remain greater than $5.92, while the prior view called for the metric to stay greater than $5.94.
HBR is estimated to be 88.3-88.5%. Adjusted SG&A expense ratio is expected to be 8.5-8.7%. Adjusted effective tax rate is anticipated to be 24-24.5%.
Shares outstanding continue to be anticipated between 522.2 million and 525.2 million.
CNC’s Zacks Rank
Centene currently has a Zacks Rank #4 (Sell).
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 2024 results so far, the bottom-line results of UnitedHealth Group Incorporated (UNH - Free Report) , Molina Healthcare, Inc. (MOH - Free Report) and Intuitive Surgical, Inc. (ISRG - Free Report) beat the Zacks Consensus Estimate.
UnitedHealth Group reported third-quarter adjusted EPS of $7.15, which surpassed the Zacks Consensus Estimate by 1.9%. The bottom line advanced 9% year over year. Revenues rose 9.1% year over year to $100.8 billion. The top line beat the consensus mark by 1.3%. Its medical care ratio was 85.2%, which deteriorated 290 basis points (bps) year over year. UNH’s operating earnings grew 2.4% year over year to $8.7 billion. However, the net margin deteriorated 30 bps year over year to 6%.
Revenues of the health benefits business of UnitedHealth, UnitedHealthcare, advanced 7.2% year over year to $74.9 billion. Earnings from operations amounted to $4.2 billion , down 8.7% year over year. Revenues in the Optum business line were $63.9 billion, which rose 12.7% year over year. Optum’s earnings from operations climbed 15.4% year over year to $4.5 billion. The UnitedHealthcare business catered to 50.7 million people as of Sept. 30, 2024, which fell 4% year over year.
Molina Healthcare’s third-quarter adjusted EPS of $6.01 beat the Zacks Consensus Estimate of $5.96. Also, the bottom line grew 19% from the year-ago period. Total revenues amounted to $10.3 billion, which improved 20.9% year over year. Also, the top line outpaced the consensus mark by 3.8%. Premium revenues of $9.7 billion increased 18% year over year.
As of Sept. 30, 2024, total membership improved 8% year over year to around 5.6 million. Investment income rose 5.4% year over year to $118 million and beat the consensus mark of $117.1 million. The consolidated medical care, or MCR, was 89.2% . The metric rose from 88.7% a year ago. Molina Healthcare’s adjusted net income increased 18% year over year to $347 million.
Intuitive Surgical reported third-quarter adjusted EPS of $1.84, which beat the Zacks Consensus Estimate of $1.65 by 11.5%. The bottom line improved 26% year over year. The company reported revenues of $2.04 billion, up 17% from the prior-year quarter’s number, on a reported as well as constant currency basis. The top line also beat the Zacks Consensus Estimate by 1.2%. Revenues from the Instruments & Accessories segment totaled $1.26 billion, indicating a year-over-year improvement of 18%.
The Systems segment’s revenues totaled $445 million, up 17.4% year over year. Intuitive Surgical shipped 341 da Vinci Surgical Systems compared with 379 in the prior-year quarter. Revenues from the Services segment amounted to $328.9 million, up 3.7% from the year-ago quarter’s level. Adjusted gross profit was $1.41 billion, up 17.3% year over year. Adjusted operating income totaled $754.9 million, up 21% year over year.