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1. Company Snapshot

1.a. Company Description

Centene Corporation operates as a multi-national healthcare enterprise that provides programs and services to under-insured and uninsured individuals in the United States.Its Managed Care segment offers health plan coverage to individuals through government subsidized programs, including Medicaid, the State children's health insurance program, long-term services and support, foster care, and medicare-medicaid plans, which cover dually eligible individuals, as well as aged, blind, or disabled programs.Its health plans include primary and specialty physician care, inpatient and outpatient hospital care, emergency and urgent care, prenatal care, laboratory and X-ray, home-based primary care, transportation assistance, vision care, dental care, telehealth, immunization, specialty pharmacy, therapy, social work, nurse advisory, and care coordination services, as well as prescriptions and limited over-the-counter drugs, medical equipment, and behavioral health and abuse services.


This segment also offers various individual, small group, and large group commercial healthcare products to employers and directly to members.The company's Specialty Services segment provides pharmacy benefits management services; nurse advice line and after-hours support services; vision and dental services, as well as staffing services to correctional systems and other government agencies; and services to Military Health System eligible beneficiaries.This segment offers its services and products to state programs, correctional facilities, healthcare organizations, employer groups, and other commercial organizations.


The company provides its services through primary and specialty care physicians, hospitals, and ancillary providers.Centene Corporation was founded in 1984 and is headquartered in St. Louis, Missouri.

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1.b. Last Insights on CNC

Centene Corporation's recent performance has been driven by its strong Q3 2025 earnings, which included an adjusted earnings beat of 50 cents per share. This was primarily due to the company's ability to navigate rising medical costs and shrinking Medicaid memberships. Despite these challenges, Centene's revenue growth remained robust. Additionally, the company has faced several lawsuits alleging potential violations of federal securities laws, but has not seen a significant impact on its operations. With a solid balance sheet and robust market position, Centene is focused on restoring margins through contract repricing and digital transformation.

1.c. Company Highlights

2. Centene's Q3 Earnings: A Closer Look at Financial Performance

Centene reported a third-quarter adjusted EPS of $0.50, exceeding their previous expectation, with premium and service revenue reaching $44.9 billion. The GAAP loss per share was $13.50, largely due to a $6.7 billion non-cash goodwill impairment charge. The adjusted EPS was boosted by a low adjusted effective tax rate, contributing $0.10. The company's financial performance was driven by a positive 2025 retroactive revenue adjustment in Florida, SG&A and performance within non-core segments, lower effective tax rate, and stronger-than-expected net investment income.

Publication Date: Oct -30

📋 Highlights
  • Adjusted EPS Surge:: Q3 adjusted EPS reached $0.50, surpassing prior guidance, driven by a $150M Florida retroactive revenue adjustment and a 150 bps Medicaid HBR improvement to 93.4%.
  • 2025 EPS Forecast Raised:: Increased 2025 adjusted EPS guidance to $2+ from $1.75, reflecting early execution on Florida CMS revenue and lower effective tax rates contributing $0.10 to EPS.
  • Medicaid Margin Stability:: Medicaid HBR improved 150 bps sequentially, aided by Florida CMS revenue gains and program integrity measures, with 2026 margins expected to remain flat at 5.5% composite.
  • Marketplace Resilience:: Despite September medical cost pressure, Marketplace HBR held at 89.9%, with $75M Q4 medical expense forecast increase and 2026 margin expansion via repricing in 95% of membership states.
  • Strong SG&A Efficiency:: Adjusted SG&A expense ratio hit 7.0%, with $79M growth in investment income and $2.4B forecast change in Commercial segment due to Marketplace trend shifts.

Segment Performance

The Medicaid business delivered 150 basis points of sequential improvement in HBR this quarter, aided by improved revenue from the Florida Children's Medical Services contract. The Medicare segment performed well, with reported HBR of 94.3%. The company's Medicare Advantage business is on track to achieve breakeven by 2027. The Marketplace business produced an in-line result despite medical cost pressure in September, and the company has positioned its marketplace book for 2026 margin expansion.

Guidance and Outlook

Centene increased its adjusted EPS forecast to at least $2, up from $1.75 per share. The company expects to provide detailed 2026 guidance on its Q4 earnings call in early February. According to Sarah London, the company is "not taking its foot off the gas on HBR improvement" and is preparing for 2027 and 2028, when it expects to see the impact of OB3 and work requirements in the expansion population.

Valuation Metrics

With a P/E Ratio of -3.47 and a P/B Ratio of 0.88, the market appears to be pricing in the company's challenges. The EV/EBITDA ratio is -5.88, indicating that the company's enterprise value is not being supported by its EBITDA. The ROE is -20.61%, and the ROIC is -14.9%, suggesting that the company's profitability is a concern. Analysts estimate next year's revenue growth at 0.6%, which may be a challenging target given the current market conditions.

Operational Highlights

The company's Medicaid margins are expected to be flat in 2026, with a focus on maintaining profitability. The company is preparing for potential changes in policy, such as eAPTCs, and is working to drive affordability through different product design. With a solid rate at 5.5% composite, Centene is well-positioned to navigate the challenges ahead.

3. NewsRoom

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Meridian Health Plan of Illinois Commits $1.15 Million to Expand St. Louis Area Foodbank Mobile Pantry Program

Dec -02

Source: prnewswire.com

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American Century Value Fund Q3 2025 Contributors/Detractors And Notable Trades

Dec -01

Source: seekingalpha.com

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Wasatch Global Value Fund Q3 2025 Performance Review

Nov -28

Source: seekingalpha.com

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Recent SNAP Disruptions Highlight Urgent Need for Sustained Action Against Food Insecurity

Nov -26

Source: prnewswire.com

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Coordinated Care Investments Bring Hope This Holiday Season: Tackling Food Insecurity and Nutrition Gaps in Washington

Nov -25

Source: prnewswire.com

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Centene's Recovery Still Has Legs - Further Margin Expansion Ahead

Nov -25

Source: seekingalpha.com

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Bill Nygren's Strategic Moves: Centene Corp Exits with a -2.14% Impact

Nov -25

Source: gurufocus.com

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Trump ACA Plan Lifts S&P 500 Health Insurance Stocks. How It Would Work — Or Not.

Nov -24

Source: investors.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (4.79%)

6. Segments

Medicaid

Expected Growth: 4.2%

Centene Corporation's Medicaid growth of 4.2% is driven by increased government funding, expanded eligibility, and rising healthcare demand. Additionally, Centene's strategic acquisitions and effective management of healthcare services contribute to its growth. Strong performance in managed care services and Medicaid expansion under the Affordable Care Act also fuel the growth.

Commercial

Expected Growth: 5.5%

Centene's commercial segment growth of 5.5% is driven by increased enrollment, higher premium rates, and expanded product offerings. Additionally, the company's strategic acquisitions and partnerships have contributed to its growth, enabling it to capitalize on emerging market trends and increase its market share.

Medicare

Expected Growth: 6.1%

Centene Corporation's Medicare segment growth of 6.1% is driven by increased enrollment, higher reimbursement rates, and expanded services. The company's strong performance in Medicare Advantage and Part D plans, as well as its growing presence in rural areas, contribute to this growth. Additionally, Centene's focus on value-based care and cost management also supports the segment's expansion.

Other/Eliminations

Expected Growth: 3.9%

Centene's Other/Eliminations segment growth of 3.9% is driven by intersegment eliminations, reinsurance, and investment income. The growth is also influenced by the company's effort to optimize its business operations and eliminate redundant costs. Additionally, Centene's expansion into new markets and product offerings contribute to the segment's growth.

7. Detailed Products

Medicaid

Government-sponsored health insurance program for low-income individuals and families

Medicare

Federal health insurance program for people 65 or older, certain younger people with disabilities, and people with End-Stage Renal Disease (permanent kidney failure requiring dialysis or a transplant)

Health Insurance Marketplace

Health insurance plans sold through the Affordable Care Act (ACA) marketplace

TRICARE

Health insurance program for military personnel, veterans, and their families

Long-Term Services and Supports (LTSS)

Home and community-based services for individuals with disabilities or chronic conditions

Correctional Healthcare

Healthcare services for correctional facilities and inmates

Health and Wellness

Preventive health services and wellness programs

8. Centene Corporation's Porter Forces

Forces Ranking

Threat Of Substitutes

Centene Corporation operates in a highly regulated industry, and the threat of substitutes is moderate. While there are alternative healthcare providers, Centene's government-sponsored healthcare services and diversified product offerings reduce the threat of substitutes.

Bargaining Power Of Customers

Centene Corporation's customers are primarily government agencies and individuals, who have limited bargaining power. The company's large customer base and diversified revenue streams reduce the bargaining power of customers.

Bargaining Power Of Suppliers

Centene Corporation relies on a network of healthcare providers, who have some bargaining power. However, the company's scale and diversified supplier base reduce the bargaining power of suppliers.

Threat Of New Entrants

The healthcare industry has high barriers to entry, including regulatory hurdles and significant capital requirements. This reduces the threat of new entrants and provides a competitive advantage to established players like Centene Corporation.

Intensity Of Rivalry

The healthcare industry is highly competitive, with several large players competing for market share. Centene Corporation faces intense rivalry from competitors, which can lead to pricing pressure and reduced margins.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 40.83%
Debt Cost 3.95%
Equity Weight 59.17%
Equity Cost 6.00%
WACC 5.16%
Leverage 69.00%

11. Quality Control: Centene Corporation passed 4 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Stock-Card
McKesson

A-Score: 6.2/10

Value: 5.4

Growth: 8.3

Quality: 4.5

Yield: 0.0

Momentum: 9.5

Volatility: 9.7

1-Year Total Return ->

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CVS Health

A-Score: 5.3/10

Value: 4.6

Growth: 4.0

Quality: 2.6

Yield: 6.0

Momentum: 7.5

Volatility: 7.0

1-Year Total Return ->

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Stock-Card
Elevance Health

A-Score: 4.8/10

Value: 6.6

Growth: 5.7

Quality: 6.8

Yield: 3.0

Momentum: 0.5

Volatility: 6.3

1-Year Total Return ->

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Stock-Card
UnitedHealth

A-Score: 4.3/10

Value: 4.9

Growth: 6.1

Quality: 5.1

Yield: 4.0

Momentum: 0.5

Volatility: 5.0

1-Year Total Return ->

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Stock-Card
Humana

A-Score: 4.2/10

Value: 6.0

Growth: 5.3

Quality: 5.2

Yield: 1.0

Momentum: 3.0

Volatility: 4.7

1-Year Total Return ->

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Stock-Card
Centene

A-Score: 3.6/10

Value: 9.3

Growth: 5.7

Quality: 3.3

Yield: 0.0

Momentum: 0.0

Volatility: 3.3

1-Year Total Return ->

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

38.34$

Current Price

38.34$

Potential

-0.00%

Expected Cash-Flows