Centene Corporation Reports Better than Expected Third Quarter with $1.62 EPS

Centene Corporation (NYSE: CNC) reported its third-quarter 2024 financial results on October 25, 2024, highlighting a mixed performance. The company achieved an adjusted diluted earnings per share (EPS) of $1.62, surpassing its GAAP diluted EPS of $1.36. Premium and service revenues for the quarter reached $36.9 billion, marking a 6% increase from the same period last year.

This growth was primarily driven by Medicaid rate increases and a significant membership surge in the Marketplace business, although it was partially offset by a decline in Medicaid membership due to redeterminations and recent divestitures. The company’s health benefits ratio (HBR) stood at 89.2%, up from 87.0% in the third quarter of 2023. This increase was attributed to higher acuity in Medicaid due to the redetermination process and impacts from Medicare Star ratings.

Meanwhile, the selling, general, and administrative (SG&A) expense ratio decreased to 8.3% from 8.7% in the previous year, reflecting the divestiture of Circle Health Group and continued expense leveraging over increased revenues. Cash flow used in operations for the quarter was $1.0 billion, primarily driven by the settlement of Marketplace risk adjustment payables and Medicaid rate increases not yet collected.

Centene Beats Market Expectations in Third Quarter on Revenue and EPS

Despite the revenue growth, Centene’s performance fell short of analyst expectations. The company reported total revenues of $42.023 billion, slightly exceeding the expected $38.02 billion. However, its adjusted diluted EPS of $1.62 was below the anticipated EPS of $1.41.

The discrepancy in EPS was partly due to a $0.10 net benefit associated with a Marketplace premium tax benefit originally expected in the fourth quarter of 2024. Centene’s performance was bolstered by a 22% increase in Marketplace membership and a 49% rise in Medicare Prescription Drug Plans compared to the same quarter in 2023.

However, the company’s traditional Medicaid membership saw a decline, decreasing from 13.47 million in 2023 to 11.48 million in 2024. This decline was a result of Medicaid redeterminations and divestitures in the Other segment, which affected overall membership numbers.

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Centene Corporation Reaffirms 2024 Guidance

Centene reaffirmed its 2024 adjusted diluted EPS guidance floor of greater than $6.80, showcasing confidence in its full-year outlook. The company also updated its GAAP diluted EPS guidance floor to greater than $5.92.

Centene’s CEO, Sarah M. London, emphasized the company’s diversified portfolio and its ability to navigate a dynamic landscape, highlighting notable RFP wins, Medicare Stars improvements, and ongoing operational efficiencies as positive indicators for Centene’s multi-year earnings trajectory.

Centene’s updated annual guidance for 2024 projects total revenues between $159 billion and $161 billion, with premium and service revenues ranging from $143.5 billion to $144.5 billion. The health benefits ratio is expected to be between 88.3% and 88.5%, while the SG&A expense ratio is anticipated to range from 8.5% to 8.7%. The company also projects an effective tax rate between 22.9% and 23.9%.

Disclaimer: The author does not hold or have a position in any securities discussed in the article.