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Centene's (CNC) Q2 Earnings Beat Estimates, Improve Y/Y

Zacks Equity Research

Centene Inc. CNC delivered second-quarter 2019 adjusted earnings per share of $1.34, beating the Zacks Consensus Estimate by 8.1%. Also, the bottom line improved 48.9% year over year on the back of operational excellence and higher revenues.  

For the second quarter, total revenues rose 29% to $18.4 billion from the year-ago period, primarily aided by the Fidelis buyout, Health Insurance Marketplace business, expansions and new programs across many states in 2018 and 2019. Moreover, the top line surpassed the Zacks Consensus Estimate by nearly 2%. However, this upside was offset by the health insurer fee moratorium to some extent.

Quarterly Operational Update

As of Jun 30, 2019, managed care membership came in at 15 million, up 17% year over year.

Health Benefit Ratio (HBR) for the reported quarter was 86.7% compared with 85.7% in the prior-year period. This increase can be attributable to the Health Insurance Marketplace business.

Adjusted Selling, General & Administrative (SG&A) expense ratio was 9% for the second quarter of 2019 compared with 9.6% for the same period last year. This contraction of 60 basis points year over year is due to the impact of the Fidelis Care acquisition.

Centene Corporation Price, Consensus and EPS Surprise

Centene Corporation Price, Consensus and EPS Surprise

Centene Corporation price-consensus-eps-surprise-chart | Centene Corporation Quote

Financial Update

As of Jun 30, 2019, the company's cash and cash equivalents totaled $6.8 billion, up 28.7% from the figure at 2018 end.

As of Jun 30, 2019, total assets were up by 11.2% year over year to $34.3 billion.

Centene’s long-term debt summed $7 billion, up 6% year over year.

For the first half of 2019, cash outflow from operations was $2.2 billion, up 69.2% year over year.

2019 Outlook

Following solid second-quarter results, the company has revised its 2019 guidance.

It now expects revenues in the range of $73.6-$74.2 billion, up from the earlier projection of $72.8-73.6 billion.

Adjusted EPS is expected in the band of $4.29-$4.49, up from the $4.24-$4.44 range.

HBR is expected within 86.6-87.1%, up from 86.5-87%.

Adjusted SG & A expense ratio is estimated between 9.1% and 9.6%, better from the previous estimate of 9.3-9.8%.

Highlights

In June 2019, Centene and WellCare shareholders approved the pending buyout of WellCare Health Plans, Inc.

Zacks Rank

Centene carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Upcoming Releases From Medical Sector

Some better-ranked stocks from the medical sector are as follows:

Molina Healthcare, Inc MOH is set to report second-quarter earnings performance on Jul 29. The stock has a Zacks Rank #1 and an Earnings ESP of +3.88%.

WellCare Health Plans, Inc. WCG is set to report second-quarter earnings on Jul 30. The stock has an Earnings ESP of +1.65% and a Zacks Rank of 3.

Humana Inc. HUM has an Earnings ESP of +1.57% and is a Zacks #3 Ranked player. The company is set to report second-quarter earnings on Jul 31.

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