Centene Corporation Struggles with Stock Performance Despite Positive Earnings Report
Saint Louis, Missouri-based Centene Corporation (CNC) is a healthcare enterprise focused on providing services to underinsured and uninsured families, commercial organizations, and military families. Currently, Centene has a market capitalization of $31.6 billion and operates in several segments, including Medicaid, Medicare, Commercial, and Other.
Stock Performance Falls Short of Market Expectations
Centene’s stock has significantly lagged behind the broader market over the past year. Year-to-date (YTD), CNC shares have fallen 15.8% and dropped 12.9% in the last 52 weeks, while the S&P 500 Index ($SPX) has experienced a 25.2% increase YTD and a 36.4% rise over the year.
Comparatively, CNC’s performance also trails the SPDR S&P Health Care Services ETF’s (XHS) 10.3% gains so far this year and 20.1% returns over 12 months.
Q3 Earnings Show Growth but Profitability Declines
Following the announcement of its better-than-expected Q3 earnings on October 25, shares of Centene rose 4.2%. The company exceeded Wall Street’s revenue expectations by 10.9%, reporting a total revenue of $42 billion, which represents a year-over-year growth of 10.5%. This growth was fueled by a 22% increase in marketplace membership and a 49% rise in Medicare prescription drug plans. Additionally, Centene provided a strong full-year revenue estimate ranging from $159 billion to $161 billion, which helped boost investor confidence.
Despite these positive revenue figures, Centene faced a downturn in profitability, with adjusted net earnings decreasing by 21.5% year-over-year to $849 million. After the initial surge in stock prices, CNC shares fell by 4% in the following trading session.
Analysts Expect Modest Growth Ahead
For the current fiscal year ending in December, analysts expect Centene to report a slight growth of 2.3% in adjusted EPS, targeting $6.83. The company’s earnings history reveals a mixed record; it has beaten Wall Street’s bottom-line estimates in three of the last four quarters, missing on one occasion. Its adjusted EPS of $1.62 for the last reported quarter exceeded analysts’ expectations by a notable 16.6%.
CNC stock has a consensus rating of “Moderate Buy.” Of the 17 analysts covering the stock, eight have given a “Strong Buy” recommendation while nine suggest a “Hold.”
Revised Ratings and Future Outlook
Market sentiment remains relatively stable. On October 30, Bernstein analyst Lance Wilkes maintained an “Outperform” rating for CNC but adjusted the price target to $88. The average price target for CNC of $82.18 suggests a potential upside of 31.4% from its current levels. The highest street target of $95 indicates an even larger potential increase of 52%.
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On the date of publication, Aditya Sarawgi did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article are solely for informational purposes. For further details, please view the Barchart Disclosure Policy here.
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