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Centene (CNC) Gears Up for Q2 Earnings: What Lies Ahead?

·5 min read

Centene Corporation CNC is set to report second-quarter 2022 results on Jul 26, before the opening bell.

In the last reported quarter, the leading multi-national healthcare company reported adjusted earnings per share of $1.83, surpassing the Zacks Consensus Estimate by 8.9% due to improvement in premium and service revenues. An uptick in managed care membership contributed to the sound quarterly performance of the health insurer. However, the upside was partly offset by escalating operating expenses resulting from higher medical costs, cost of services and premium tax expenses.

Let’s see how things have shaped up prior to the second-quarter earnings announcement.

Trend in Estimate Revision

The Zacks Consensus Estimate for second-quarter earnings per share of $1.69 has witnessed no movement in the past week. The estimate suggests a 35.2% increase from the prior-year figure of $1.25 per share. Centene beat the consensus estimate in two of the prior four quarters and missed twice, with the average negative earnings surprise being 0.4%. This is depicted in the graph below:

Centene Corporation Price and EPS Surprise

Centene Corporation Price and EPS Surprise
Centene Corporation Price and EPS Surprise

Centene Corporation price-eps-surprise | Centene Corporation Quote

The consensus estimate for second-quarter revenues of $35.4 billion indicates a 14.2% increase from the year-ago reported figure.

Factors to Note

Centene’s performance for the to-be-reported quarter is likely to have gained from improved volumes and contributions from both Medicaid and Medicare businesses. The top line is likely to have benefited from better premiums, growth in the Health Insurance Marketplace business, plus expansions and new programs across many states. Membership growth is also likely to have contributed to this upside.

The Zacks Consensus Estimate for the company’s premiums is pegged at $31,468 million, which indicates an improvement from the prior-year reported figure of $27,627 million. This is likely to have positioned CNC for year-over-year growth.

Centene’s performance is expected to have received a boost from its leading nationwide position in government-sponsored healthcare. The company is likely to have witnessed higher enrolment in the Medicare Advantage business in the to-be-reported quarter. Its Health Insurance Marketplace business might have witnessed an improved performance on the back of consistent pricing discipline and higher retention rates.

Medical memberships of the company have been rising over the past several quarters on contract wins and expansion across different regions, and the momentum is expected to have continued in the second quarter. The contract win to cater to Missouri's Medicaid members might have expanded its reach in the state in the quarter under review.

The Zacks Consensus Estimate for the company’s investment and other income indicates a 76.9% year-over-year rise. The consensus mark for service revenues signals an 89.1% jump from year-ago levels. However, rising operating expenses in the quarter under review might have put pressure on the bottom line. Higher medical costs, selling, general and administrative expenses might have affected its profits in the second quarter, making an earnings beat uncertain.

Earnings Whispers

Our proven model does not conclusively predict an earnings beat for Centene this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. That is not the case here as you will see below.

Earnings ESP: The company’s Earnings ESP is 0.00%. This is because the Most Accurate Estimate is currently pegged at earnings of $1.69 per share, in line with the Zacks Consensus Estimate.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Centene currently carries a Zacks Rank #3.

Stocks to Consider

While an earnings beat looks uncertain for Centene, here are some companies from the broader medical space that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this time around:

ADC Therapeutics SA ADCT has an Earnings ESP of +0.78% and a Zacks Rank #2.

The Zacks Consensus Estimate for ADC Therapeutics’ top line for the to-be-reported quarter is pegged at $20.2 million, indicating a rise from $3.8 million a year ago. ADCT beat earnings estimates in each of the past four quarters with a surprise of 40.9%.

Alcon Inc. ALC has an Earnings ESP of +5.07% and is a Zacks #1 Ranked player. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Alcon’s earnings per share for the to-be-reported quarter is pegged at 55 cents. ALC beat earnings estimates in each of the past four quarters with a surprise of 21.4%.

BioNTech SE BNTX has an Earnings ESP of +1.99% and is a Zacks #2 Ranked player.

The Zacks Consensus Estimate for BioNTech’s bottom line for the to-be-reported quarter is pegged at $6.63 per share. BNTX beat earnings estimates in each of the past four quarters with a surprise of 56.9%.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.


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