Centene Corporation CNC currently gains from improved premium and service revenues, numerous contract wins, an expanding Marketplace business and a sound financial position.

CNC’s Zacks Rank & Price Performance

Centene currently carries a Zacks Rank #3 (Hold).

The stock has gained 5.1% in the past month against the industry’s 8.3% decline. The Zacks Medical sector declined 6.1% while the S&P 500 composite decreased 1.4% in the same time frame.

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Centene’s Robust Growth Prospects

The Zacks Consensus Estimate for Centene’s 2025 earnings per share (EPS) is pegged at $7.02, indicating an improvement of 3.1% from the 2024 estimate. The consensus mark for 2025 revenues is $169 billion, implying 4.7% growth from the 2024 estimate.

CNC’s Decent Earnings Surprise History

CNC’s bottom line outpaced estimates in three of the trailing four quarters and missed the mark once, the average surprise being 7.13%.

Centene’s Key Business Tailwinds

Centene's revenue growth is fueled by a robust and expanding customer base within its Medicaid and Medicare businesses, which drive premium increases. This is significant since premiums are the primary revenue driver for health insurers. The strength of these businesses has led to numerous contract awards and renewals, further supporting membership growth. As of Sept. 30, 2024, total membership was 28.6 million, which improved 2.4% year over year. 

Centene’s expertise in specialized services has enabled it to build and enhance relationships with both members and providers. This capability allows it to deliver improved care to individuals enrolled in government-sponsored programs. Additionally, an aging U.S. population continues to favor Medicare plans, ensuring sustained demand for Centene's offerings.

In the first nine months of 2024, Centene reported a 4.2% year-over-year increase in premium and service revenues. Management projects it to range between $154 billion and $156 billion for 2025. Notably, Centene secured Medicaid contracts from state authorities in Ohio, Michigan and New Hampshire in 2024. Its Commercial Marketplace business maintains a strong national footprint, serving 4.5 million members as of Sept. 30, 2024, which advanced 22.3% year over year. 

The company actively leverages mergers and acquisitions to enhance its capabilities and broaden its presence across the United States. Concurrently, it divests underperforming businesses to concentrate on its core Managed Care operations. These divestitures often support initiatives such as share buybacks and debt reduction. A reduced debt burden leads to lower interest expenses, which declined 2.2% year over year in the first nine months of 2024. 

Centene's financial health is underscored by its sound cash reserves and adequate cash-generating abilities. As of Sept. 30, 2024, cash and cash equivalents were $14.6 billion.

Stocks to Consider

Some better-ranked stocks in the Medical space are Doximity, Inc. DOCS, The Ensign Group, Inc. ENSG and DaVita Inc. DVA. While Doximity currently sports a Zacks Rank #1 (Strong Buy), Ensign Group and DaVita carry a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Doximity’s earnings surpassed estimates in each of the last four quarters, the average surprise being 22.12%. The Zacks Consensus Estimate for DOCS’ 2025 earnings indicates a rise of 10% from the 2024 estimate. The consensus mark for revenues implies an improvement of 10.1% from the 2024 estimate. The consensus mark for DOCS’ 2025 earnings has moved 10.6% north in the past 60 days.

The bottom line of Ensign Group beat estimates in each of the trailing four quarters, the average surprise being 1.34%. The Zacks Consensus Estimate for ENSG’s 2025 earnings indicates a rise of 10.7% from the 2024 estimate. The consensus mark for revenues implies an improvement of 11% from the 2024 estimate. The consensus mark for ENSG’s 2025 earnings has moved 0.2% north in the past 30 days.

DaVita’s earnings outpaced estimates in three of the trailing four quarters and missed the mark once, the average surprise being 10.59%. The Zacks Consensus Estimate for DVA’s 2025 earnings indicates a rise of 15.7% from the 2024 estimate. The consensus mark for revenues implies an improvement of 3.7% from the 2024 estimate. The consensus mark for DVA’s 2025 earnings has moved 0.6% north in the past 60 days.

Doximity stock has inched up 0.5% in the past month. However, shares of Ensign Group and DaVita have declined 9.9% and 5.4%, respectively, in the same time frame.

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