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Is a Beat in the Cards for Centene's (CNC) Q1 Earnings?

Zacks Equity Research

Centene Corporation CNC will release first-quarter 2019 results on Apr 23, before the market opens. In the last reported quarter, the company delivered adjusted earnings per share of $1.38, beating the Zacks Consensus Estimate by 3.8%.

For the to-be-reported quarter, the Zacks Consensus Estimate for earnings per share is pegged at $1.32, up 21.1% year over year. This would likely be supported by the company’s solid Government and Medicaid businesses, which in turn, would be driven by new contracts.

The Zacks Consensus Estimate for first-quarter revenues stands at $17.6 billion, reflecting a year-over-year rise of nearly 33.1%.  Rise in Ambetter members plus expansions and new programs across many states are likely to continue aiding the company’s bottom line.

Medicaid membership is expected to increase, driven by new contracts. However, the first quarter might witness a decline in Medicare Advantage membership by around 20,000 members, mainly due to the repositioning of Fidelis.

The company’s debt burden is likely to pile up due to its growth-related investments, which are majorly financed through borrowings. As a result, interest expenses, which saw a persistent rise over the past several years, might weigh on the margins.

The Zacks Consensus Estimate for the general and administrative expense ratio for the first quarter is expected to be 9.30%, lower than the year-ago quarter's figure of 10.50%.

What the Quantitative Model States

Our proven model conclusively shows that Centene is likely to beat on earnings this reporting cycle. This is because the stock has the right combination of a positive Earnings ESP and a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen.

Earnings ESP: Centene has an Earnings ESP of +1.98%. This is because the Most Accurate Estimate is pegged at $1.35, higher than the Zacks Consensus Estimate of $1.32. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

Centene Corporation Price and EPS Surprise

Centene Corporation Price and EPS Surprise | Centene Corporation Quote

Zacks Rank: Centene carries a Zacks Rank #3, which increases the predictive power of ESP. Moreover, a positive ESP in the combination raises the odds of a likely earnings surprise for the stock this time around.

Conversely, the Sell-rated stocks (#4 or 5) should never be considered going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Other Stocks to Consider

Some other stocks worth considering from the medical sector with the perfect combination of elements to also surpass estimates in the next releases are as follows:

Anthem, Inc. ANTM is set to report first-quarter 2019 earnings on Apr 23. The stock has an Earnings ESP of +1.29% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Molina Healthcare, Inc MOH is set to report first-quarter earnings on Apr 29. This stock has an Earnings ESP of +3.49% and a Zacks Rank of 1.

Humana Inc. HUM has an Earnings ESP of +0.84% and a Zacks Rank of 3. The company is set to report first-quarter earnings on May 1.

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Anthem, Inc. (ANTM) : Free Stock Analysis Report
 
Centene Corporation (CNC) : Free Stock Analysis Report
 
Humana Inc. (HUM) : Free Stock Analysis Report
 
Molina Healthcare, Inc (MOH) : Free Stock Analysis Report
 
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