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Centene (CNC) Gears Up for Q3 Earnings: What Lies Ahead?

Centene's (CNC) third-quarter results are likely to reflect better revenues and membership growth.

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This story originally appeared on Zacks

Centene Corporation CNC is slated to release third-quarter 2021 results on Oct 26, before the opening bell.



In the last reported quarter, Centene reported earnings per share of $1.25, which missed the Zacks Consensus Estimate by 11.3%. However, the bottom line improved 47.9% year over year, attributable to higher revenues.



In the same quarter, total revenues improved 12% year over year to $31 billion, led by the recent PANTHERx buyout, membership growth in the Medicare business and the continuing suspension of Medicaid eligibility redeterminations. The top line also outpaced the consensus mark by 3%.

- Zacks

Q3 Estimates

The Zacks Consensus Estimate for the company’s third-quarter earnings per share is pegged at $1.29, indicating a 2.4% rise from the prior-year quarter’s reported figure. The consensus mark for revenues stands at $31.8 billion, which suggests growth of 9.4% from the year-ago quarter’s reported number.

Factors to Note

Centene’s performance for the to-be-reported quarter is likely to have gained from higher revenues, better volumes and a contribution from both its Medicaid and Medicare businesses.



Revenues are likely to have benefited from better premiums, growth in the Health Insurance Marketplace business and expansions plus new programs across many states. Membership growth is also likely to have contributed to this upside. However, the same is likely to have suffered lower investment income.



The Zacks Consensus Estimate for the company’s premiums is pegged at $28.9 billion, which indicates an improvement of 8.9% from the prior-year quarter’s reported figure. The consensus mark for Investment and other income implies a downside of 57.3% from the year-ago quarter’s level.



Centene’s performance is expected to have received a boost from its leading nationwide position in offering government sponsored healthcare. The company is likely to have witnessed higher enrolment in its Medicare Advantage business in the to-be-reported quarter. Its Health Insurance Marketplace business might have witnessed an improving performance on the back of consistent pricing discipline and higher retention rates.



Medical membership of the company has been rising over the past several quarters on contract wins and expansion across different regions. The consensus estimate for total membership suggests growth of 1.7% from the year-ago quarter’s reported figure.



The company is likely to have gained from lower SG&A expense ratio owing to lower short-term variable compensation costs and the leveraging of expenses over higher revenues due to improved Medicaid membership.

Earnings Surprise History

The company has a decent earnings surprise history. Its bottom line beat estimates in two of the trailing four quarters and missed the same in the remaining two, the average surprise being 5.23%. This is depicted in the chart below:

Centene Corporation Price and EPS Surprise



Centene Corporation Price and EPS Surprise

Centene Corporation price-eps-surprise | Centene Corporation Quote

What Our Quantitative Model Predicts

The proven Zacks 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 odds of an earnings beat. But that’s not the case here.



Earnings ESP:  Centene has an Earnings ESP of 0.00%. This is because both the Most Accurate Estimate and Zacks Consensus Estimate are pegged at $1.29. 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 #4 (Sell).



You can see the complete list of today’s Zacks #1 Rank stocks here.

Stocks to Consider

Some stocks worth considering from the medical space with the perfect mix of elements to surpass estimates in their upcoming releases are as follows.



Acadia Healthcare Company, Inc. ACHC has an Earnings ESP of +3.00% and a Zacks Rank #3, currently.



Molina Healthcare, Inc. MOH has an Earnings ESP of +0.46% and a Zacks Rank of 3, presently.



MEDNAX, Inc. MD has an Earnings ESP of +4.41% and is Zacks #3 Ranked, presently.



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