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What Lies Ahead for Centene (CNC) Stock in Q4 Earnings?

Zacks Equity Research

Centene Corporation CNC will release fourth-quarter 2018 results on Feb 5, before the market opens. In the last reported quarter, the company came up with an earnings surprise of 1.1%, backed by its execution of growth strategy, uptick in the Health Insurance Marketplace business, purchases, expansions and new programs across many states.

What’s in Store for Q4?

The Zacks Consensus Estimate for fourth-quarter revenues and earnings stands at $16.2 billion and $1.44 per share, indicating a year-over-year rise of nearly 26.8% and 37%, respectively. This upside might be primarily supported by a strong performing marketplace business.

The company’s top line is likely to be backed by Government and Medicaid businesses because of strong performances and growth across different geographies.

For the fourth quarter of 2018, the company expects lower interest income due to weak investable balances related to the payment of the health insurer fee, risk adjustment and the California rate over payments.

The Medicaid membership is expected to have increased in the fourth quarter, driven by new contracts. The Zacks Consensus Estimate for the same is pegged at 14.1 billion, up 15.3% year over year. The company’s acquisition of Fidelis last July has  helped it boost its national leadership position in government sponsored healthcare space. The same is also anticipated to solidify the company’s overall membership.

The company’s debt burden is likely to pile up due to its growth-related investments such as acquisitions. High operating costs are likely to hurt the company’s bottom line.

What the Quantitative Model States

Our proven model does not conclusively show that Centene is likely to beat on earnings this to-be-reported quarter. This is because the stock needs to have the right combination of both a positive Earnings ESP and a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. But that is not the case here as you can see below.

Earnings ESP: Centene has an Earnings ESP of -0.15%. 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. However, the company’s negative ESP leaves surprise prediction inconclusive as it also needs a positive ESP to be confident about a likely earnings surprise.

We caution against the Sell-rated stocks (#4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Upcoming Releases From Medical Sector

Some stocks worth considering from the medical sector are as follows:

Molina Healthcare, Inc MOH is set to report fourth-quarter 2018 earnings performance on Feb 11. The stock has an Earnings ESP of +2.89% and a Zacks Rank of 1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Acadia Healthcare Company, Inc. ACHC is slated to report fourth-quarter earnings on Feb 20. It has a Zacks Rank of 3 and an Earnings ESP of +3.04%.

Mednax, Inc MD has an Earnings ESP of +0.12%. This Zacks #3 Ranked company is scheduled to release fourth-quarter earnings on Feb 7.

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