Centene (CNC) Q4 Earnings Beat on Solid Membership Growth

Centene Corporation CNC reported fourth-quarter 2021 adjusted earnings per share of $1.01, which outpaced the Zacks Consensus Estimate by 3.1%. The bottom line more than doubled year over year.

The strong quarterly performance reflects revenue growth supported by 15% growth in premium and service revenues. Overall membership growth contributed to the upside. However, the improvement was partly offset by elevated operating expenses.

Centene Corporation Price, Consensus and EPS Surprise

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

Quarterly Operational Update

Centene’s total revenues amounted to $32.6 billion in the fourth quarter, which rose 15% year over year. The growth was driven by increased Medicare and Medicaid membership, initiation of contracts in North Carolina, and the acquisitions of PANTHERx and Circle Health. The top line missed the consensus mark by a whisker.

As of Dec 31, 2021, managed care membership rose 4% year over year to 26.6 million.

In the quarter under review, Health Benefits Ratio (HBR) came in at 87.9%, which improved 50 basis points (bps) year over year. The metric gained on the back of reduced testing and treatment costs linked with COVID-19 pandemic across the Health Insurance Marketplace business.

Total operating expenses of $32 billion escalated 13.1% year over year. Selling, general and administrative (SG&A) expenses increased 4.4% year over year to $2.8 billion.

Meanwhile, adjusted SG&A expense ratio improved 50 bps year over year to 9.2% in the fourth quarter. The metric’s performance was driven by membership growth and the PANTHERx buyout leading to leveraging of expenses over increased revenues. Reduced acquisition related costs accounted for better performance of the metric.

Financial Update (as of Dec 31, 2021)

Centene exited the fourth quarter with cash and cash equivalents of $13.1 billion, which climbed 21.5% from the 2020-end level.

Total assets increased 14.1% from the figure at 2020 end to $78.4 billion.

CNC’s long-term debt amounted to $18.6 billion, up 11.3% from the level as of Dec 31, 2020.

Total stockholders’ equity of $26.8 billion increased 4% from the 2020-end figure.

Full-Year Update

For 2021, total revenues climbed 13% year over year to $126 billion but missed the Zacks Consensus Estimate of $126.2 billion.

Adjusted EPS of Centene stood at $5.15 per share beat the Zacks Consensus Estimate of $5.12. The bottom line advanced 3% year over year.

HBR for the full year came in at 87.8%, which deteriorated 160 bps year over year.

Adjusted SG&A expense ratio of 8.4% improved 50 bps year over year.

In 2021, net cash provided by operating activities totaled $4.2 billion, which plunged 23.6% from the 2020-end figure.

2022 Guidance

Earlier, Centene had disclosed its outlook for 2022 at December 2021 Investor Day. CNC maintains its view for 2022 with respect to most of the metrics.

Management projects revenues to lie within $135.9-$137.9 billion, which suggests an increase from the 2021 level of $126 billion.

Adjusted EPS is anticipated to be $5.30-$5.50, which indicates an improvement from $5.15 reported in 2021.

This year, HBR is estimated between 87.6% and 88.2%.

Adjusted SG&A expense ratio is expected to lie within 7.8-8.3%.

Zacks Rank

Centene currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Other Medical Sector Releases

Among other players from the Medical space that have reported fourth-quarter results so far, the bottom-line results of UnitedHealth Group Incorporated UNH, Cigna Corporation CI and Anthem, Inc. ANTM beat the respective Zacks Consensus Estimate.

UnitedHealth Group reported fourth-quarter 2021 earnings of $4.48 per share, which outpaced the Zacks Consensus Estimate by 4.2% and increased 77.8% year over year on revenue growth. UNH’s revenues of $73.7 billion climbed 12.6% year over year and beat the consensus mark by 1%. Medical care ratio of UnitedHealth Group for the fourth quarter was 83.7%.

Cigna reported fourth-quarter 2021 earnings of $4.77 per share, which beat the Zacks Consensus Estimate by 1.9%. The bottom line improved 36% year over year. Adjusted revenues of CI totaled $45.7 billion, which rose 10% year over year in the quarter under review. The top line outpaced the consensus mark by 3.7%. Cigna witnessed an uptick of 431,000 customers on a year-over-year basis to 17.1 million in its medical enrollment in the fourth quarter.

Anthem delivered fourth-quarter 2021 earnings of $5.14 per share, which beat the Zacks Consensus Estimate by 0.6% owing to better revenues. The bottom line soared 102.4% year over year. Operating revenues of ANTM for the quarter grew 14.2% year over year. Anthem’s benefit expense ratio of 89.5% expanded 60 bps from the prior-year quarter’s figure.

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