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Investing.com - Centene (NYSE:CNC), currently trading at $56.65 and near its 52-week low of $52.93, has withdrawn its 2025 guidance due to unexpected health insurance exchange risk adjustment transfers and accelerating Medicaid cost trends, TD Cowen reported Monday. According to InvestingPro data, the healthcare provider appears undervalued based on its Fair Value analysis.
The firm reiterated its Buy rating and $73.00 price target on Centene stock despite the guidance withdrawal. Centene’s previous 2025 adjusted EPS guidance was "greater than" $7.25 per share, but the combined impact could potentially result in approximately a 50% EPS adjustment. InvestingPro analysis shows analyst targets ranging from $61 to $92, with multiple ProTips highlighting both challenges and opportunities for investors.
Centene faces an estimated $1.8 billion reduction in fiscal year 2025 risk adjustment revenue transfer related to 22 of its 29 states ($2.75 per share), with a similar impact expected for the remaining seven states. This implies a total impact of approximately $2.5 billion and $3.82 per share if the remaining states have a proportional effect.
The company also reported increased Medicaid cost trends in behavioral health, home health assistance, and high-cost drugs in specific regions including New York and Florida. These increases are partially attributed to required coverage of related services without corresponding premium adjustments.
TD Cowen noted that despite Centene’s Medicare Advantage and Prescription Drug Plan service lines performing better than expectations, the firm expects Centene shares to "trade off materially" following this announcement, particularly given the stock’s historically low valuation prior to this news. The company maintains a GREAT financial health score according to InvestingPro, with a P/E ratio of 8.46x and moderate debt levels. Subscribers can access the comprehensive Pro Research Report for deeper insights into Centene’s financial position and growth prospects.
In other recent news, Centene announced the withdrawal of its 2025 earnings guidance due to significant challenges in marketplace risk adjustments and increased Medicaid costs. The company reported a projected $1.8 billion reduction in net risk adjustment revenue transfer, impacting adjusted earnings per share by approximately $2.75. This decision follows data from Wakely indicating slower growth and higher morbidity in the ACA exchange market. In response, Centene is refiling its 2026 marketplace rates to address these issues. Both JPMorgan and UBS downgraded Centene’s stock, citing concerns over the company’s ability to manage these challenges. JPMorgan adjusted its rating from Overweight to Neutral, while UBS revised its rating from Buy to Neutral, each significantly lowering their price targets. Meanwhile, Cantor Fitzgerald maintained an Overweight rating and a $90 price target, suggesting limited impact from Medicaid work requirements. Morgan Stanley (NYSE:MS) initiated coverage with an Overweight rating and a $70 price target, highlighting Centene’s growth opportunities in the Medicaid and Medicare markets.
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