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Centene Hits a Home Run with Its Q2 Earnings Results

Keith Speights, The Motley Fool

Investors were given a lot to like when Centene Corporation (NYSE: CNC) announced its quarterly results in April. The health insurer's revenue jumped nearly 40%, and its adjusted earnings grew 27.5% year over year.

Those wondering if Centene's momentum could continue got their answer when the company announced its Q2 results before the market opened on Tuesday. Centene hit another home run. Here's what you need to know from the company's quarterly update.

Smart tablet with health insurance sign up

Image source: Getty Images.

By the numbers

Centene announced Q2 revenue of $18.4 billion, a 29% increase from the $14.2 billion reported in the same quarter of the previous year. The company's reported revenue also beat the average analysts' revenue estimate of $18.01 billion.

On a generally accepted accounting principles (GAAP) basis, Centene's net income in the second quarter was $1.18 per share. The company's bottom line reflected a 57% increase from the prior-year period GAAP net income of $0.75 per share.

Wall Street tends to focus more on adjusted non-GAAP bottom-line numbers. Centene reported adjusted non-GAAP net income of $1.34 per share, a 49% rise from the $0.90 per share posted in the second quarter of 2018. This easily topped the average analysts' earnings estimate of $1.23 per share.

Behind the numbers

Centene has enjoyed great growth in recent quarters. The company's strong Q2 revenue was due to its recent acquisition of Fidelis Care, growth in the health insurance marketplace business, and expansions and new programs (primarily in Arkansas, New Mexico, and Pennsylvania) during 2018 and 2019.

This revenue growth helped Centene's bottom line improve as well. The company's operational expenses increased at roughly the same rate as its revenue growth. However, Centene's earnings were boosted by higher investment and other income and lower income tax expense.  

Other notable developments for Centene during the second quarter included:

  • Its Oregon subsidiary, Trillium Community Health Plan, won an expanded contract to serve as a coordinated care organization for six counties in Oregon
  • Centene's Spanish subsidiary, Primero Salud, increased its stake in Spanish healthcare company Ribera Salud from 50% to 90%  
  • All proposals related to Centene's pending acquisition of WellCare Health Plans were approved by both companies' shareholders
  • The company received a 100% score on the Disability Equality Index (DEI) as one of the "Best Places to Work for People with Disabilities"
  • Centene increased its managed care membership by 17% to 15 million members
  • The company earned accreditation from the National Committee of Quality Assurance (NCQA)

Looking ahead

Centene boosted its full-year 2019 guidance thanks to its strong Q2 results. The company now projects revenue of between $73.6 billion and $74.2 billion, up from its previous forecast of $72.8 billion to $73.6 billion. It predicts non-GAAP adjusted earnings per share (EPS) of between $4.29 and $4.49, up from its previous guidance of between $4.24 and $4.44.

The big development for investors to look forward to is Centene's acquisition of WellCare. Centene CEO Michael Neidorff said that this deal will "bolster and diversify our product offerings, significantly increase our scale, and provide access to new markets -- enhancing Centene's long-term growth outlook."

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Keith Speights has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.