Centene tumbles after cutting outlook on increased medical costs

Managed care provider Centene (CNC) is sinking after lowering its 2012 EPS guidance, primarily due to higher medical costs at several of its subsidiaries. Specifically, the company said that its Kentucky Health Plan, one of its service areas in Texas, and its Celtic individual health business had generated "negative financial results" last month. As a result, Centene, which specializes in providing services to uninsured and underinsured individuals, slashed its 2012 EPS outlook to $1.45-$1.65, from its previous outlook of $2.64-$2.84. Analysts' consensus estimate was $2.68. Moreover, Centene now expects to report a second quarter loss before returning to profitability in the third quarter. Centene said it's evaluating the goodwill and intangible assets of its Celtic unit, and may take a non-cash impairment charge of about $28M for the unit. Such a charge is not included in the revised guidance, the company added. In a note to investors this morning, Deutsche Bank reiterated its Hold rating on Centene, as the magnitude of the company's guidance cut was worse than the firm had expected. However, Deutsche Bank recommends buying another managed care company, AmeriGroup (AGP), on today's sympathy weakness, as the company doesn't have exposure to either Kentucky or the service region of Texas whose costs increased, according to the firm. In early trading, Centene tumbled $10.89, or 30.70%, to $24.58 and Amerigroup fell $5.14, or 8.23%, to $57.35. Other managed care providers also fell, with WellCare (WCG), Molina (MOH), and Coventry (CVH) all retreating significantly.