Can Solid Medicaid Business Boost Centene (CNC) Q4 Earnings?

Centene Corporation (NYSE:CNC) will release fourth-quarter 2017 results on Feb 6, before the market opens.

Centene has been witnessing consistent growth in its membership over the past few quarters that has significantly boosted the top line. This uptrend is expected to continue in the fourth quarter as well. The Zacks Consensus Estimate for total membership is currently pegged at 12.2 billion, reflecting 7% year-over-year growth.

Centene’s membership has been continuously increasing on the back of its solid Medicaid expansion. The company’s intention to continue with its public exchange business while other health insurers are exiting it, has boosted its Medicaid membership. The trend is expected to continue in the fourth quarter. The Zacks Consensus Estimate for Medicaid membership stands at 5.9 billion, reflecting year-over-year growth of 4%.

In addition, Centene’s cost saving initiatives are likely to aid the margins in the fourth quarter. The Zacks Consensus Estimate for total general and administrative expense ratio is currently pegged at 0.10 compared with 9.00 in the third quarter of 2017.

Other Factors

The company’s growing Medicare beneficiaries are also likely to boost the top line in the fourth quarter.

Centene expects its exchange business to perform well in the to-be-reported quarter, continuing the previous trend.

We also expect Centene’s international business to boost the top line in the quarter.

The company’s share repurchase programs intended to enhance shareholders’ value might impact margins positively by reducing the outstanding share count.

Why a Likely Positive Surprise?

Our proven model shows that Centene has the right combination of two key ingredients to beat estimates this quarter.

Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is +1.24%. This is because the Most Accurate estimate of 95 cents is higher than the Zacks Consensus Estimate of 94 cents. The positive ESP is a leading indicator of a likely earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Centene Corporation Price and EPS Surprise

Zacks Rank: Centene sports a Zacks Rank #1 (Strong Buy). Note that stocks with a Zacks Rank #1, 2 (Buy) or 3 (Hold) have a significantly higher chance of beating on earnings. The combination of Centene’s favorable Zacks Rank and positive Earnings ESP makes us reasonably confident of an earnings beat.

Conversely, the Sell-rated stocks (Zacks Rank #4 or 5) should never be considered going into an earnings announcement.

Other Stocks to Consider

Here are some other companies from the medical sector that you may want to consider as these have the right combination of elements to post an earnings beat this quarter:

AmerisourceBergen Corporation (NYSE:ABC) , which is set to report fourth-quarter earnings on Feb 6, has an Earnings ESP of +1.28% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

LifePoint Health Inc. (NASDAQ:LPNT) has an Earnings ESP of +1.28% and a Zacks Rank #3. The company is set to report fourth-quarter earnings on Feb 23.

Community Health Systems, Inc. (NYSE:CYH) has an Earnings ESP of +6.46% and a Zacks Rank #3. The company is expected to report fourth-quarter earnings on Feb 19.

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