Centene (NYSE:CNC) Corporation has announced its Q3 2023 earnings results, reporting adjusted earnings per share (EPS) of $2, surpassing internal expectations by $0.20. The company also expects full-year 2023 adjusted EPS to reach at least $6.60, which would represent a year-over-year growth of over 14%. These results were discussed during an earnings call in which the company outlined its growth strategy and operational progress.
Key takeaways from the call include:
- Centene is on track with its Medicaid redeterminations process, having already completed over 40% of members. The majority of redeterminations are expected to be completed by May 2024.
- The Ambetter franchise is growing, with nearly 3.7 million members as of September 30th.
- The company's Medicare Advantage business is performing well, with two-thirds of its membership showing year-over-year raw score improvement in Star ratings.
- Centene has reached a definitive agreement to divest Circle Health, with the deal expected to close in Q1 2024.
- The company's PBM migration project is progressing well, with successful transitions already in place.
During the call, Centene highlighted its commitment to leveraging modern technology to optimize clinical insights and improve member health journeys. The company reported an increase in digital clinical sources flowing into its Clinical Data Hub, which is expected to reduce costs, improve information accuracy, and support predictive modeling for care management interventions.
In terms of financial performance, Centene reported $35 billion in premium and service revenue for Q3 2023, and a 50% increase in adjusted diluted EPS from the same period in 2022. According to InvestingPro data, the company's revenue for the last twelve months was $138.27 billion, with a growth rate of 7.0%. The gross profit margin stood at 16.72%.
The company also provided updates on its membership growth and performance in Medicaid, Medicare, and the marketplace. The performance reflects the company's high earnings quality, as highlighted by InvestingPro Tips, where the company's free cash flow exceeds net income. The company's management has also been aggressively buying back shares, indicating a strong belief in the company's future performance.
Centene also discussed the sustained performance of its business in 2023, despite significant growth in Special Enrollment Period (SEP) membership. Factors contributing to this performance include underlying growth, a lack of pent-up demand in SEP membership, a healthier risk pool due to market growth, solid pricing discipline, execution on clinical initiatives, and expertise from the team.
The company also adjusted its risk adjustment payable to $1.8 billion from $1.5 billion based on Wakely data. It expects to maintain its target Medicaid MLR of 90.1% for 2024. The growth in the exchange business exceeded expectations and provides momentum for 2024.
Centene is also seeing more retention in the SEP population, which will contribute to future margin growth. In the Medicare business, Centene remains on track to be down $4 billion in 2024 and is focused on narrowing its target population. The company is also working towards getting 85% of members into 3.5-star plans by October 2025.
The company concluded the call by thanking its employees and expressing its focus on creating value for its members, stakeholders, and shareholders. It also mentioned an upcoming Investor Day in December. For more insights, InvestingPro Tips can be accessed here, offering 15 additional tips for Centene and other companies.
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