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On Monday, Barclays (LON:BARC) analysts downgraded Centene stock (NYSE: NYSE:CNC) from Overweight to Equalweight, highlighting growing concerns in the Part D and Affordable Care Act (ACA) segments. The analysts set a new price target of $65, citing challenges in these areas as problematic for Centene, which holds a significant market share in both sectors. Currently trading at $56.44, the stock carries a P/E ratio of 8.43x, suggesting a relatively modest valuation multiple compared to its peers.
The analysts noted unexpected behavior changes among new high-income members in Part D, where Centene experienced a 28% year-over-year growth, significantly exceeding market averages. This adverse selection is seen as a potential risk for the company. Despite these challenges, InvestingPro data shows Centene maintains a "GREAT" overall financial health score, with revenue growth of 7.22% in the last twelve months.
In the ACA Marketplace, the analysts conducted a county-level analysis that showed consumer sensitivity to premium increases. Preliminary views of 2026 rates indicate potential significant disruption next year, further influencing the decision to downgrade the stock rating. For deeper insights into Centene’s valuation and growth prospects, InvestingPro subscribers can access exclusive analysis and 10+ additional ProTips.
Barclays adjusted its earnings per share (EPS) estimates for Centene, lowering the 2025 EPS to $7.00, a 5% reduction, and the 2026 EPS to $7.40, a 14% decrease. The price target was reduced based on an 8.5x target multiple on the 2026 EPS estimate, down from a previous 9.5x multiple. Trading near its 52-week low of $55.03, InvestingPro analysis suggests the stock is currently undervalued based on its Fair Value model.
In other recent news, Centene Corporation reported its first-quarter 2025 earnings, surpassing expectations with an adjusted diluted earnings per share (EPS) of $2.90, compared to the forecasted $2.38. Revenue for the quarter also exceeded expectations, reaching $48.62 billion against a forecast of $42.79 billion. Despite the strong earnings, Jefferies downgraded its price target for Centene from $64.00 to $61.00, maintaining a Hold rating due to increased utilization pressure in various segments. Meanwhile, Cantor Fitzgerald reaffirmed its Overweight rating on Centene with a price target of $90.00, citing potential positive impacts from proposed healthcare legislation. At Centene’s annual shareholder meeting, the election of eleven directors was approved, along with the executive compensation and the 2025 Stock Incentive Plan. However, two shareholder proposals related to climate change were not approved. These developments highlight the company’s recent financial performance, strategic decisions, and ongoing challenges in the healthcare sector.
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