Yahoo Finance Here's Why You Should Retain Centene (CNC) Stock for Now
Centene Corporation CNC is currently aided by improved premium and service revenues, Medicaid contract wins, a growing Marketplace business and a commendable financial position.
Zacks Rank & Price Performance
Centene currently carries a Zacks Rank #3 (Hold).
The stock has gained 14.8% in the past year compared with the industry’s 5.9% growth.
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Favorable Style Score
CNC is well-poised for progress, as evidenced by its impressive VGM Score of A. Here V stands for Value, G for Growth and M for Momentum, and the score is a weighted combination of all three factors.
Robust Growth Prospects
The Zacks Consensus Estimate for Centene’s 2024 earnings per share (EPS) is pegged at $6.80, indicating an improvement of 1.8% from the year-earlier reading. The consensus mark for 2025 earnings is pegged at $7.55 per share, suggesting 11.1% growth from the 2024 estimate.
Impressive Earnings Surprise History
CNC’s bottom line outpaced earnings estimates in each of the trailing four quarters, the average surprise being 10.45%.
A Strong EPS Outlook
Management forecasts adjusted EPS to be greater than $6.80 in 2024, which suggests growth of 1.8% from the 2023 figure.
Key Business Tailwinds
Centene’s revenues are driven by a strong customer base in its Medicaid and Medicare businesses, which in turn, boost premiums. This bodes well since premiums are the most significant top-line contributor for a health insurer. The strength of these businesses has fetched several contract wins and renewed agreements to CNC, which are another means to boost membership growth.
A specialized services prowess has enabled Centene to establish and strengthen relationships with members and providers as well as deliver enhanced care to members of government-sponsored programs. An aging U.S. population favors Medicare plans, which is likely to keep sustaining the solid demand for the health insurer’s plans.
CNC’s premium and service revenues improved 4% year over year in the first quarter of 2024. Management anticipates premium and service revenues to be within the range of $135.5-$138.5 billion for 2024.
The ongoing year witnessed CNC receiving Medicaid contracts from the state authorities of Michigan and New Hampshire. Its Commercial Marketplace business boasts an extensive presence across the United States, serving 4.3 million members as of Mar 31, 2024.
Centene resorts to mergers and acquisitions in a bid to upgrade its capabilities and bolster its nationwide presence. It also resorts to divestitures of underperforming businesses to intensify focus on its Managed Care business. In January 2024, CNC sold Circle Health to Pure Health, as expected in the first quarter. These divestitures are often a means of pursuing share buybacks and paying off debt levels. Needless to say, a lower debt burden induces a decline in interest expenses, which dipped 1.1% year over year in the first quarter, and subsequently, provides an impetus to CNC’s margins.
Centene also boasts a solid financial strength, substantiated by growing cash reserves. As of Mar 31, 2024, cash and cash equivalents increased 2.3% from the 2023-end level.
Stocks to Consider
Some better-ranked stocks in the Medical space are Bioventus Inc. BVS, Alcon Inc. ALC and Encompass Health Corporation EHC. Bioventus currently sports a Zacks Rank #1 (Strong Buy), and Alcon and Encompass Health carry a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Bioventus’ earnings surpassed estimates in three of the last four quarters and missed the mark once, the average surprise being 151.67%. The Zacks Consensus Estimate for BVS’ 2024 earnings is pegged at 27 cents per share, which indicates a nearly 14-fold from the prior-year tally. The consensus mark for revenues suggests an improvement of 6% from the year-ago actual. The consensus mark for BVS’ 2024 earnings has moved 68.8% north in the past seven days.
The bottom line of Alcon beat estimates in three of the trailing four quarters and missed the mark once, the average beat being 5.27%. The Zacks Consensus Estimate for ALC’s 2024 earnings indicates a rise of 11.3% from the year-ago figure. The consensus mark for revenues suggests an improvement of 6.4% from the prior-year tally. The consensus mark for ALC’s 2024 earnings has moved 0.7% north in the past 60 days.
Encompass Health’s earnings outpaced estimates in each of the trailing four quarters, the average surprise being 18.74%. The Zacks Consensus Estimate for EHC’s 2024 earnings indicates a rise of 12.4% from the year-ago figure. The consensus mark for revenues suggests an improvement of 10.5% from the prior-year tally. The consensus mark for EHC’s 2024 earnings has moved 0.7% north in the past seven days.
Shares of Bioventus, Alcon and Encompass Health have gained 375.6%, 11.3% and 41.5%, respectively, in the past year.
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