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Why Should You Hold Centene (CNC) in Your Portfolio Now?

Centene Corporation CNC has been in investors’ good books owing to its prudent operating performance, strong inorganic growth and solid fundamentals. A solid guidance is another highlight of the stock.

The stock carries a 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 the three factors.

Year to date, shares of the health insurer have gained 1.6%, underperforming its industry’s growth of 31.2%. However, given its solid fundamentals, it is expected to bounce back going forward.

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Other companies in the same space, such as The Joint Corp. JYNT, Anthem Inc. ANTM and Molina Healthcare, Inc. MOH have also rallied 296.8%, 15.2% and 23.2% in the same time frame.

The second quarter witnessed better revenues, led by the recent PANTHERx buyout, membership growth in the Medicare business and the continuing suspension of Medicaid eligibility redeterminations.

Concurrent with June-quarter results, the presently Zacks Rank #3 (Hold) company revised its full-year outlook. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

For the current year, management anticipates revenues in the $123.3-$125.3 billion range, up from the previous projection of $120.1-$122.1 billion. For 2021, the company’s adjusted EPS is still expected to be $5.05-$5.35, up from the past guidance of $5-$5.30.
The leading health insurer has been witnessing solid revenue growth since 2002. In the first six months, its top line increased 13.8% year over year owing to the PANTHERx buyout, Medicaid membership growth and a strong membership rise in the Medicare business.

Centene’s inorganic growth story also impresses. In December 2020, it acquired PANTHERx, one of the largest and the fastest-growing specialty pharmacies in the United States. This buyout solidifies its foothold in the booming specialty drug market.

The leading insurer also entered into an agreement to buy Magellan Health that will strengthen its position in the market and enable it to establish a behavioral health platform. Given the current demand uptrend for behavioural health, this is the right time for such a strategic move. The company also completed the buyout of the remainder of Circle Health.
This clearly shows the company’s constant efforts in strengthening its international portfolio.

On the back of several contract wins, medical membership of the company is steadily rising. In 2020 and during the first half of 2021, the same rose 67% and 3% year over year, respectively. As of Jun 30, 2021, managed care membership came in at 25.1 million, up 3% year over year.

Last month, Buckeye Health Plan, the company’s Ohio unit, received a Medicaid contract from the Ohio Department of Medicaid. Its Nevada subsidiary SilverSummit Healthplan also won a contract from the Nevada Department of Health and Human Services — Health Care Financing and Policy.

With several contracts in the pipeline, we expect this trend to continue.

However, the company's Marketplace business has been suffering for quite some time now. Membership in the Health Insurance marketplace declined 9.1% year over year in the first six months of 2021.

The company's 2021 earnings estimate indicates an upside of 2.8% from the prior-year reported figure.
 


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Molina Healthcare, Inc (MOH): Free Stock Analysis Report

Centene Corporation (CNC): Free Stock Analysis Report

Anthem, Inc. (ANTM): Free Stock Analysis Report

The Joint Corp. (JYNT): Free Stock Analysis Report

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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.

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