Headline: Centene Shares Surge on Robust Q3 Earnings
Centene Corporation (NYSE:CNC) reported third-quarter earnings that exceeded Wall Street expectations, driven by the performance of its commercial health insurance plans. This positive outcome helped alleviate investor concerns after competitors warned of high costs in government-backed insurance plans last week. On Friday, Centene's shares saw a significant increase, rising approximately 12% to $68.92 in early trading. This recovery followed a 16% drop last week, triggered by announcements from Elevance and UnitedHealth (NYSE:UNH) about rising expenses in their Medicaid plans.
The end of a federal policy during the COVID-19 pandemic, which required insurers to maintain coverage for low-income Americans, has resulted in higher costs as insurers now cover patients with more serious health issues. Despite this, Centene managed to deliver a quarter described as a "surprise" by analysts such as Michael Ha from Baird, especially considering the "unprecedented levels" of Medicaid pressure reported by competitors.
Centene predicted that costs would likely decrease next year as the gap narrows between the amount states pay insurers for Medicaid coverage and the actual expenses incurred by the insurers. Centene's CFO, Drew Asher, expressed confidence during a call with analysts, stating that it is just a matter of time before balance is restored.
Centene forecasted the medical loss ratio, representing the percentage of premiums used for medical services, to be between 88.3% and 88.5% for the current year. This figure is slightly above the average analyst estimate of 87.93% compiled by LSEG. The company reported an actual ratio of 89.2% for the quarter ending September 30, which exceeded the expected 88.03%.
Despite facing higher expenses, Centene maintained its annual profit forecast, anticipating earnings above $6.80 per share. This is an optimistic stance compared to the analyst consensus of $6.73. The company's quarterly profit was reported at $1.62 per share, surpassing the average estimate of $1.33.