Centene Corporation (CNC Quick QuoteCNC - Free Report) currently trades at 12.34X forward earnings, above its five-year median of 11.33X, but below the industry average of 15.20X. The stock carries a Value Score of A, suggesting its valuation remains reasonable relative to its earnings outlook. CNC trades at a discount to UnitedHealth Group Incorporated (UNH Quick QuoteUNH - Free Report) , at 17.17X, and Elevance Health, Inc. (ELV Quick QuoteELV - Free Report) , at 13.84X.

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What’s Driving CNC’s Rally?

Centene shares have jumped 57% year to date, far ahead of the industry’s 16.5% gain, reflecting stronger confidence in the company’s recovery. Investors entered 2026 expecting only a modest rebound after a difficult 2025, but operating results have improved much faster than anticipated. The S&P 500 has gained 14.7% over the same period, while peers UnitedHealth and Elevance Health have returned 14% and 14.2%, respectively.

YTD Price Performance: CNC, UNH, ELV, Industry & S&P 500

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After such a sharp rerating, further upside will likely depend less on recovery expectations and more on evidence that recent margin gains can be sustained into 2027.

Can Medicaid Margins Keep Moving Higher?

Centene’s Medicaid business is showing progress. The health benefits ratio, or HBR, was 93.9% in the second quarter, improving 100 basis points from a year earlier. For the first half, Medicaid HBR improved to 93.5% from 94.2%. Management expects full-year Medicaid HBR of about 93.5%, slightly better than its original 93.7% outlook.

The rate-cost setup has improved, with rate increases running slightly ahead of Centene’s fundamental cost trend, while medical-cost management initiatives are helping contain utilization. The path is unlikely to be smooth. Membership losses, changes in member acuity and utilization remain key risks. The main test will be whether Centene can push Medicaid HBR lower even as enrollment continues to shrink.

Can Marketplace Profitability Hold Into 2027?

Marketplace has become a stronger part of the turnaround story. Centene raised its 2026 pretax-margin outlook for the business to 4.5-5%, helped by repricing, moderating medical trends and stronger risk-adjustment positioning.

Second-quarter results benefited from roughly $180 million of favorable development tied to 2025 Marketplace risk adjustment relative to prior expectations. That benefit is unlikely to repeat. With 2027 products already being priced and policy and enrollment conditions still shifting, investors will be watching whether Centene can protect margins without giving up too much membership.

Can the Earnings Recovery Carry Into 2027?

Centene raised 2026 adjusted EPS guidance to more than $4.80, but management explicitly said roughly 50 cents per share of 2026 earnings will not recur in 2027, largely reflecting prior-year Marketplace and Medicare settlements. The challenge is whether Medicaid margin improvement, Marketplace profitability, cost savings and Medicare recovery can more than offset that headwind.

The Zacks Consensus Estimate calls for 2026 earnings of $4.89 per share, up 135.1% from a year ago. Over the past 60 days, the estimate has seen one upward revision and no cuts. For 2027, analysts expect EPS to rise another 9.2% to $5.34, with two upward revisions and one downward revision over the same period.

Revenue growth is much less compelling. The consensus estimate points to revenues of $196.29 billion in 2026, up 0.8%, followed by a slight decline to $192.58 billion in 2027. The numbers make clear that the recovery depends more on margins and execution than on faster top-line growth.

Centene has topped earnings estimates in each of the past four quarters, producing an average surprise of 151.3%.

Centene Price, Consensus and EPS Surprise

Centene Corporation price-consensus-eps-surprise-chart | Centene Corporation Quote

Risks Have Eased, but Still Remain

Centene remains heavily exposed to government-sponsored healthcare programs, leaving results sensitive to changes in funding, reimbursement and regulation across Medicaid, Medicare and ACA Marketplace plans.

Costs also remain a concern. Total operating expenses rose 5.5% in 2023, 5.8% in 2024 and 26.6% in 2025, then increased another 6.6% year over year in the first half of 2026. Pricing actions and tighter cost controls should help, but medical expenses and continued investment could limit margin expansion.

Capital efficiency also has room to improve. Centene’s trailing 12-month return on capital stands at 6.8%, below the industry average of 9.9%.

Final Words

Centene’s operating recovery has gained traction, with better medical-cost performance and improving profitability driving a much stronger earnings outlook. Its earnings beats and improving estimates provide additional support.

However, the strong year-to-date rally leaves less room for execution missteps. Membership losses, nonrecurring 2026 benefits, policy exposure and below-industry capital efficiency remain key risks. At 12.34X forward earnings, CNC still trades below peers and the industry, but the discount is not compelling enough to outweigh those uncertainties, particularly with the stock already trading above its five-year median. Investors may therefore prefer to wait for clearer evidence that margin and earnings gains can extend into 2027. CNC currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.