Centene Corporation (CNC - Free Report) is well-poised for development on the back of a growing top line plus mergers and acquisitions strategy.
The company has witnessed 2020 earnings estimates move 0.4% north over the past seven days.
Centene also boasts a stellar earnings surprise history, having outpaced the Zacks Consensus Estimate in the trailing four quarters, the average being 4.4%. This trend of consecutive estimate beats vouches for the company’s operating efficiency.
The company is well-placed for growth, evident from its favorable VGM Score of A. Here V stands for Value, G for Growth and M for Momentum with the score being a weighted combination of all three factors.
Moreover, it revised its 2019 guidance after delivering solid second-quarter results. It now expects revenues in the range of $73.6-$74.2 billion, indicating the mid-point to be 23.2% above the reported figure of 2018. Adjusted EPS is expected in the band of $4.29-$4.49, the mid-point suggested to be 24% higher than last year’s reported figure.
Now let’s see what makes this stock an investor favorite.
Centene has been witnessing consistent and significant revenue growth since 2002. The company saw a CAGR of 39.6% from 2012 to 2018. This momentum also continued in the first half of 2019 with the metric surging 34.4% year over year. This upside could primarily be backed by membership growth, expansion of contracts and other investments and we expect the top line to continue growing.
The company’s mergers and acquisitions activity mainly targets expanding its markets and increasing its Medicaid membership. A few buyouts like that of Community Medical Holdings, MHM Services and Fidelis Care have helped it boost its portfolio and strengthen capabilities. Last July, the company struck a joint venture with Ascension to establish a Medicare Advantage plan, which will be operational in multiple geographies beginning 2020.
Moreover, Centene’s purchase of WellCare Health Plans, Inc. (WCG - Free Report) is on track and is expected to close by the first half of 2020. The combination of these two entities will lead to a wider scale and diversification with more than 12 million Medicaid and around 5 million Medicare members. It is presumed that this new company will have estimated pro forma 2019 revenues in excess of $100 billion and an EBITDA of $5 billion. The deal is projected to generate adjusted earnings per share accretion of approximately mid-single digits during the year two following its completion with long-term growth opportunities and cost-reduction benefits across markets and products.
The company’s long-term growth rate is pegged at 14.2%, higher than its industry's average of 14%.
Shares of this Zacks Rank #3 (Hold) company have lost 35.9% in a year's time, wider than its industry’s decline of 13.4%.
Stocks to Consider
Investors interested in the medical sector can take a look at some better-ranked stocks like Molina Healthcare, Inc (MOH - Free Report) and Humana Inc. (HUM - Free Report) . You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Molina offers Medicaid-related solutions to meet the health care needs of low-income families and individuals. In the trailing four quarters, the company came up with average beat of 66.9%. The stock sports a Zacks Rank #1.
Humana works as a health and well-being company in the United States. The company has a Zacks Rank of #2 (Buy) and pulled off average positive surprise of 7.79% in the last four quarters.
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