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On Tuesday, Jefferies adjusted its outlook on Centene Corporation (NYSE:CNC), a $29.4 billion healthcare provider currently trading at $59, by reducing the price target from $64.00 to $61.00 while maintaining a Hold rating on the shares. According to InvestingPro analysis, the company appears undervalued despite the decision, which follows Centene management’s acknowledgment of increased utilization pressure in various segments, including Medicaid, Health Insurance Marketplace (HIX), and Prescription Drug Plans (PDP).
Centene’s Medicaid performance was notably bolstered by healthier-than-anticipated rates, which helped to counterbalance some of the pressures. The company maintains a solid financial foundation with a "GREAT" overall health score from InvestingPro, operating with moderate debt levels and a healthy current ratio of 1.11. However, the addition of 1.9 million new HIX members is creating margin pressures, despite the company’s unchanged goal of maintaining core margin stability. The analysts at Jefferies noted that while there is an opportunity for repricing in 2026, the visibility into Medicaid and HIX segments remains unclear.
The company’s management has indicated that significant efforts will be necessary to preserve the earnings per share (EPS) guidance amid these challenges. The caution expressed regarding the Medicare segment was more pronounced than the first-quarter medical loss ratio (MLR) suggested.
Looking ahead, analysts see 2025 as another year of uphill challenges for Centene. The report implies that while there may be opportunities ahead, particularly with the potential for a repricing opportunity in 2026, the current outlook is one of cautious management as the company navigates low visibility in key areas of its business.
In other recent news, Centene Corporation reported a strong performance in its first-quarter 2025 earnings, exceeding analyst expectations. The company achieved an adjusted diluted earnings per share (EPS) of $2.90, surpassing the forecasted $2.38. Revenue also outperformed projections, reaching $48.62 billion compared to the anticipated $42.79 billion. Despite these positive financial results, Centene’s stock experienced a decline in pre-market trading. The company has revised its full-year 2025 EPS outlook to greater than $7.25 and increased its premium and service revenue guidance to $165 billion. Analysts from Nephron Research and UBS inquired about various aspects of Centene’s performance and outlook, including the impact of flu-related costs and potential changes in public exchange subsidies. Centene’s management expressed confidence in navigating these challenges and highlighted ongoing strategic initiatives to enhance financial performance and operational efficiency.
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