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What's in the Cards for Centene's (CNC) Earnings in Q3?

Zacks Equity Research

Centene Corporation CNC will release third-quarter 2019 results on Oct 22, before the market opens.

The Zacks Consensus Estimate for the to-be-reported quarter’s earnings is pegged at 95 cents, suggesting a 5.6% rise from the year-ago reported figure.

In the last reported quarter, the company delivered 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 higher revenues.  

Let’s see how things are shaping up prior to the announcement.

Earnings Catalysts for Q3

The Government and Medicaid businesses are most likely to have continued performing well in the third quarter of 2019.

The company is expected to have witnessed membership growth, in the to-be reported quarter, on the back of new contracts, leading to an enhanced top line. The consensus mark for total membership implies an increase of 2.2% from the year-ago count . Centene’s marketplace business is also expected to have provided cushion to its revenues. The Zacks Consensus Estimate for third-quarter revenues stands at $18.3 billion, indicating a nearly 13.5% improvement from the prior-year reported number.

New contracts and increased membership might have led to surge in premiums as well. The Zacks Consensus Estimate for third-quarter premiums hints at an uptick of 13.3% from the year-earlier reported figure.

Moreover, expenses are expected to have reduced in the to-be-reported quarter owing to the company’s operating initiatives. The Zacks Consensus Estimate for third-quarter general and administrative expense ratio is pegged at 9.49%, denoting a decline from the year-ago reported figure of 12.60%.

Further, Centene is likely to have witnessed a steady cashflow in the third quarter of 2019.

However, long-term debt might have persistently dented the margins in the to-be-reported quarter. Additionally, interest expenses of the company are likely to have escalated at a constant pace.

Key Developments in Q3

Centene and WellCare announced that the pending buyout of WellCare Health won approval from the insurance departments of 17 states. The merger is estimated to be completed in the first half of 2020. The combined entity will have a wider scale and diversification with more than 12 million Medicaid and around 5 million Medicare members.

The company also announced that it will expand its offering in the 2020 Health Insurance Marketplace or exchange. It is enhancing its existence across 10 markets, namely Arizona, Florida, Georgia, Kansas, North Carolina, Ohio, South Carolina, Tennessee, Texas and Washington.

What the Quantitative Model States

Our proven model does not conclusively predict an earnings beat for Centene this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: Centene has an Earnings ESP of -1.12%. This is because the Most Accurate Estimate is pegged at 94 cents, lower than the Zacks Consensus Estimate of 95 cents.  You can see the complete list of today’s Zacks #1 Rank stocks here.

Centene Corporation Price and Consensus

Centene Corporation Price and Consensus

Centene Corporation price-consensus-chart | 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 difficult for the stock this time around.

Stocks to Consider

Some stocks worth considering from the medical sector with the perfect mix of elements to surpass estimates in the next releases are as follows:
Mednax, Inc MD is set to report third-quarter earnings on Nov 7. The stock has a Zacks Rank of 3 and an Earnings ESP of +1.10%.

AmerisourceBergen Corporation ABC is slated to announce third-quarter earnings on Nov 7. The stock has an Earnings ESP of +0.55% and is Zacks #3 Ranked.

Molina Healthcare, Inc MOH is set to report third-quarter earnings on Oct 29. The stock has a Zacks Rank of 1 and an Earnings ESP of +0.92%.

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Centene Corporation (CNC) : Free Stock Analysis Report
 
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