Can Lower Managed Care Profits Hurt Centene (CNC) Q4 Earnings?
Centene Corporation CNC is set to report its fourth-quarter 2022 results on Feb 7, before the opening bell.
In the last reported quarter, the leading multi-national healthcare company reported adjusted earnings per share of $1.30, surpassing the Zacks Consensus Estimate by 6.6%, due to higher premiums owing to significant membership growth within Centene’s Medicare business. The acquisition of Magellan Health and organic Medicaid growth also contributed to the upside. However, the positives were partly offset by the divestiture of PANTHERx completed in July 2022 and elevated operating expenses.
Let’s see how things have shaped up prior to the fourth-quarter earnings announcement.
The Trend in Estimate Revision
The Zacks Consensus Estimate for fourth-quarter earnings per share of 87 cents has witnessed no movement in the past week. The estimate suggests a 13.9% decrease from the prior-year figure of $1.01 per share. Centene beat the consensus estimate in all the prior four quarters, with the average surprise being 5.2%. This is depicted in the graph below:
Centene Corporation Price and EPS Surprise
Centene Corporation price-eps-surprise | Centene Corporation Quote
The consensus estimate for fourth-quarter revenues of $35.6 billion indicates a 9.3% increase from the year-ago reported figure while our estimate suggests an 8% increase.
Factors to Note
Both the Zacks Consensus Estimate and our estimate for the company’s Managed Care profits for the fourth quarter suggests a 26.8% year-over-year decline. This is likely to have positioned CNC for a year-over-year reduction in the bottom line. The Zacks Consensus Estimate for the company’s investment and other income indicates a 28.1% year-over-year fall while our estimate predicts a 26.5% reduction.
Further, rising operating expenses in the quarter under review might have put pressure on the bottom line. Higher medical costs and cost of services are likely to have affected its profits in the fourth quarter, making an earnings beat uncertain. Our estimate for total operating expenses suggests 8.8% year-over-year growth.
The negatives were likely partially offset by improved volumes and contributions from both Medicaid and Medicare businesses. The top line is likely to have benefited from better premiums, expansions and new programs across many states. Membership growth is also likely to have provided a respite.
Medical memberships of the company have been rising over the past several quarters on contract wins and expansion across different regions, and the momentum is expected to have continued in the fourth quarter. The Zacks Consensus Estimate for total Medicaid memberships indicates a 5.9% year-over-year rise while our estimate suggests 6.1% growth. The consensus estimate for overall membership growth is pegged at 4.8% while our estimate predicts a 5% increase.
The Zacks Consensus Estimate for the company’s premiums is pegged at $31,697 million, which indicates a 9.7% improvement from the prior-year reported figure while our estimate suggests 7.2% year-over-year growth. Similarly, the consensus estimate for service revenues of $1,736 million indicates 7.8% growth from the year-ago quarter. Centene’s performance is expected to have received a boost from its leading nationwide position in government-sponsored healthcare.
Our proven model does not conclusively predict an earnings beat for Centene this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. That is not the case here, as you will see below.
Earnings ESP: The company’s Earnings ESP is 0.00%. This is because the Most Accurate Estimate is currently pegged at earnings of 87 cents per share, in line with the Zacks Consensus Estimate.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Centene currently carries a Zacks Rank #3.
Stocks to Consider
While an earnings beat looks uncertain for Centene, here are some companies from the broader medical space that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this time around:
ADC Therapeutics SA ADCT has an Earnings ESP of +59.39% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for ADC Therapeutics’ bottom line for the to-be-reported quarter has witnessed one upward estimate revision in the past 30 days against none in the opposite direction. ADCT beat earnings estimates in three of the past four quarters and missed once, with an average surprise of 26.1%.
Haemonetics Corporation HAE has an Earnings ESP of +2.53% and a Zacks Rank #2.
The Zacks Consensus Estimate for Haemonetics’s bottom line for the to-be-reported quarter is pegged at 79 cents per share. It has witnessed one upward estimate revision in the past 30 days against none in the opposite direction. HAE beat earnings estimates in all the past four quarters, the average surprise being 12.1%.
OPKO Health, Inc. OPK has an Earnings ESP of +15.09% and is a Zacks #3 Ranked player.
The Zacks Consensus Estimate for OPKO Health’s bottom line for the to-be-reported quarter remained stable over the past week. The consensus mark for OPK’s revenues is pegged at $167.5 million.
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Haemonetics Corporation (HAE) : Free Stock Analysis Report
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