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Centene Corp (CNC), a managed care provider in the very strong Health Care sector, reported earnings before the opening on Tuesday that beat analyst estimates, just as they had in each of the past 8 quarters. CNC was up 5% last week, which equaled its average gain in the week following its earnings report. They also announced a 2/1 stock split effective 2/20/15. Based on CNC’s announced acquisition of highly regarded Agate Resources, which provides a variety of healthcare products and services to the Oregon consumer, CNC traded up to a new high of 112.80 before profit taking pushed the stock to 106.64 prior to last Tuesday morning’s earnings report.
On theearnings conference call management was upbeat, and spoke to stable health care costs in 2015. The company should benefit from Indiana, where CNC has a 28% market share, second only to Anthem Health’s (ANTM) 33%, becoming the 28th state to expand Medicaid benefit programs under the Affordable Care Act
Centene is a managed care provider to individuals who receive benefits under Medicaid. Revenues and earnings have been on a strong upward path for the past three years with the company reporting earnings of $4.50 in 2014 vs. $2.95 in 2013. The company recently held their semi-annual investor day and surprised analysts with very upbeat guidance for 2015. The company has estimated a 30% increase in revenues with earnings per share in the range of $5.05 to $5.35.
This caused Barclays analyst Joshua Raskin to reiterate his overweight buy recommendation and raise his price target for CNC from $104 to $120. The strong growth in revenues that the company has experienced since 2011 is now having a significant impact on earnings per share. Medicaid managed care is the fastest growing segment of the Health Care sector and Centene has been a prime beneficiary. Proposed Medicaid expansion in states such as Florida are expected to benefit stocks like CNC. With the Florida expansion plan looked upon more favorably in the Florida House and Senate than previous plans, a vote in March is expected. Wedbush Securities had positive comments recently on the impact of Medicaid expansion on managed care providers in general, and Centene specifically, as they raised their price target on CNC to $125.
Centene has had a bullish Chaikin Power Gauge stock rating since February of 2014, and has been outperforming the market and the health care stocks since mid-April 2014. CNC pulled back before their earnings report last week, and after reporting, moved sharply to the upside. With the Health Care sector very strong, the stock should be bought in anticipation of strong 2015 earnings pushing the stock to new highs above $120.
Centene has a very bullish Chaikin Power Gauge stock rating, which is driven by Industry Group strength, a strong earnings trend, projected earnings growth, positive trends in analyst estimates revisions and opinions as well as positive Financial Metrics. The stock has a growing short interest ratio that may have resulted in short covering in CNC’s stock after they reported earnings last Tuesday morning.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
