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Centene Banks on Investments and Acquisitions for Growth

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Centene Corp. (CNC - Free Report) , a health insurer, primarily dealing with government insurance products such as Medicare and Medicaid, is rapidly evolving into a diversified healthcare enterprise.

Centene has resorted to a number of acquisitions and investments, which will add substantially to the company’s business portfolio. In April, Centene agreed to certain undertakings with the New York Department of Health. This includes a $340 million contribution to the State of New York to be paid over a five-year period. This contribution will be used for initiatives consistent with Centene's mission of providing high-quality healthcare to vulnerable populations within the state.

In the same month, Centene completed the acquisition of MHM Services, a national provider of healthcare and staffing services to conventional systems and other governmental agencies. This acquisition adds one new state to Centene's portfolio to 13 states.

In March, the company completed the acquisition of Community Medical Group (CMG), which represents the company’s targeted approach toward vertical integration in healthcare. In addition to CMG’s primary care services, its specialty care, transportation and a suite of social and other support services should enhance Centene’s service portfolio.

In the same month, Centene made an equity investment in RX Advance, a full-service pharmacy benefits manager. The company expects to use the company's cloud-based technology platform to significantly reduce administrative cost and affordable drug-impacted medical cost.

Also in March, the company made an additional 61% investment in Interpreta. This is an innovative health IT company focused on clinical and genomic data, as well as real-time analytics.

These transactions testify to Centene’s continued execution on its diversification strategy. This would enhance its position as a healthcare enterprise and a leader in government-sponsored healthcare. Adding capabilities in the provider  pharmacy and technology categories should provide growth and margin opportunities for Centene well into the future.

Centene has given a strong operational performance for the past many years, a trend which continued in the first quarter, marked by solid top and bottom-line growth and robust operating cash flows. Membership at the end of the first quarter increased 6%, revenues were up 13% and earnings per share surged 94%.

Its robust results led to a 6.5% surge in share price, outperforming the industry’s growth of 1.9%.

Centene carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the same space are WellCare Health Plans Inc. (WCG - Free Report) , Anthem, Inc. (ANTM - Free Report) and Humana Inc. (HUM - Free Report) .  

While WellCare carries a Zacks Rank #1 (Strong Buy), each of the other two companies carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank  stocks here.

WellCare surpassed estimates in each of the last four reported quarters, with an average positive surprise of 51.7%.

Humana beat estimates in all four reported quarters, with an average positive surprise of 6.2%.

Anthem came up with a positive surprise in each of the last four reported quarters at an average of 7.2%.

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