Centene Corporation CNC is set to report third-quarter 2024 results on Oct. 25, 2024, before the opening bell. The Zacks Consensus Estimate for the to-be-reported quarter’s earnings is currently pegged at $1.39 per shareon revenues of $37.9 billion.
Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.
The third-quarter earnings estimate has witnessed downward revisions over the past 60 days. The bottom-line projection indicates a year-over-year plunge of 30.5%. Also, the Zacks Consensus Estimate for quarterly revenues suggests a year-over-year decline of 0.4%.
Image Source: Zacks Investment Research
Centene beat the consensus estimate in three of the last four quarters and missed once, with the average surprise being 9.6%.
Centene Corporation Price and EPS Surprise
Centene Corporation price-eps-surprise | Centene Corporation Quote
Q3 Earnings Whispers for CNC
Our proven model does not conclusively predict an earnings beat for the company this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy), or 3 (Hold) increases the odds of an earnings beat. That’s not the case here.
CNC has an Earnings ESP of -1.69% and a Zacks Rank #4 (Sell).
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
You can see the complete list of today’s Zacks #1 Rank stocks here.
What’s Shaping CNC’s Q3 Results?
Centene's third-quarter performance is expected to have benefited from enhanced contributions from its Commercial business. The positives are expected to have been amplified by the launch of new programs across different states and growth in memberships. However, a decline in premiums and rising medical costs are likely to have offset the positives.
Both the Zacks Consensus Estimate and our model estimate for the company’s total commercial memberships indicate a more than 17% year-over-year increase, primarily due to growth in the commercial marketplace. Both the consensus estimate and our model estimate for Medicare PDP memberships signal nearly 47% growth from the year-ago quarter.
The Zacks Consensus Estimate for overall membership growth is pegged at 1.6%, whereas our model estimate indicates a 1.8% rise. This is expected to have been partially offset by a decline in Medicaid memberships. Both the consensus estimate and our model estimate for the company’s Medicaid memberships indicate around a 14% decline from a year ago. This is likely to have affected premiums. The Zacks Consensus Estimate for the company’s premiums indicates a 0.2% fall from the prior-year reported level, whereas our model predicts a 0.4% decline.
The consensus estimate for service revenues indicates a more than 24% fall from the year-ago quarter’s $1.1 billion. Moreover, with seniors continuing the resumption of elective procedures following the pause during the pandemic, CNC’s medical costs are expected to have remained elevated in the third quarter. This is expected to have resulted in a year-over-year decline in profit margins. The Zacks Consensus Estimate for the total health benefits ratio is pegged at 88.64%, up from 87% in the year-ago period, meaning a reduced portion remaining in hand after paying claims.
These factors are likely to have positioned the company for a year-over-year decline, making an earnings beat uncertain. Nevertheless, the falling cost of services and some other expenses in the quarter under review are likely to have aided the bottom line. Our estimate for the total operating expenses suggests a 0.2% year-over-year decline. Also, the Zacks Consensus Estimate for the company’s investment and other income indicates more than 97% year-over-year growth from $214 million. These are likely to have provided some respite.
CNC’s Price Performance & Valuation
Centene's stock has declined 17.7% year to date, underperforming the industry’s growth of 2.1%. Some of its peers like Humana Inc. HUM and Molina Healthcare, Inc. MOH have plunged 42.7% and 21.4%, respectively, during this time. All these stocks have lagged the S&P 500 significantly, which has rallied 22.7% during the same period.
CNC’s YTD Price Performance
Image Source: Zacks Investment Research
Now, let’s look at the value Centene offers investors at current levels.
The company’s valuation looks cheaper compared with the industry average. Currently, CNC is trading at 8.45X forward 12 months earnings, below its five-year median of 11.71X and the industry’s average of 15.89X, indicating investors’ lack of confidence in the stock.
Image Source: Zacks Investment Research
Assessing Centene’s Prospects
Centene’s diversified portfolio and expected growth in the commercial marketplace business position it for long-term growth. Its partnerships and acquisitions are targeted at expanding the company’s markets and increasing its memberships. The company also doesn’t shy away from getting rid of operations with lower profitability.
However, challenges such as high debt levels and rising medical costs are concerns. Its debt burden can affect its inorganic growth strategy. Rising medical costs continue to catch health insurers off guard, as they seem to lack a full understanding of the situation yet. Increasing costs, higher medical care ratio and tighter federal reimbursement rules will likely haunt companies like CNC. Investors should closely monitor these factors.
Final Words
While CNC’s long-term outlook remains promising, it might not be the right time to buy just yet. New investors seeking immediate gains should exercise patience for a more favorable entry point. Rushing into the market now may restrict potential profits. For current shareholders, it might be prudent to lock in profits now. The stock appears to have limited short-term growth potential.
Zacks' Research Chief Names "Stock Most Likely to Double"
Our team of experts has just released the 5 stocks with the greatest probability of gaining +100% or more in the coming months. Of those 5, Director of Research Sheraz Mian highlights the one stock set to climb highest.
This top pick is among the most innovative financial firms. With a fast-growing customer base (already 50+ million) and a diverse set of cutting edge solutions, this stock is poised for big gains. Of course, all our elite picks aren’t winners but this one could far surpass earlier Zacks’ Stocks Set to Double like Nano-X Imaging which shot up +129.6% in little more than 9 months.
Free: See Our Top Stock And 4 Runners UpHumana Inc. (HUM) : Free Stock Analysis Report
Molina Healthcare, Inc (MOH) : Free Stock Analysis Report
Centene Corporation (CNC) : Free Stock Analysis Report
To read this article on Zacks.com click here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
