Centene Pulls 2025 Guidance as Marketplace Growth Falters
The decision comes after a thorough look at industry risk adjustment data from the independent actuarial firm Wakely, which analyzed 22 out of Centene's 29 Marketplace states, representing approximately 72% of its Marketplace membership. According to the company, these data show higher-than-expected overall market morbidity and a slower pace of market growth.
CNC is anticipating a shortfall of about $1.8 billion in net risk adjustment revenues, which would mean a $2.75 impact on adjusted diluted EPS for 2025. Although it does not have data from the other seven states, management anticipates a further decline in risk-adjusted revenues due to similar morbidity trends. Per the Wall Street Journal, shares of CNC plummeted in after-hours trading following the announcement, showcasing investors' anxiety over shrinking profit margins and the broader implications for managed care organizations.
Despite headwinds, CNC shared that the final 2024 risk-adjusted results from the Centers for Medicare and Medicaid Services aligned with their expectations, and its Medicare Advantage and Medicare PDP segments are performing better than its expectations in the second quarter of 2025. However, Medicaid is facing challenges due to rising costs in behavioral health, home care and expensive medications, particularly in states like New York and Florida.
As we look toward 2026, Centene is taking proactive steps to adjust its rates, aiming to account for a higher morbidity baseline. This adjustment is seen as a necessary move to help balance out potential losses. The company plans to make these pricing changes in the states where it conducts most of its marketplace business. The early refiling of 2026 rates by CNC suggests a more defensive pricing approach in the future.
A close look at second-quarter earnings and data analysis is required to move forward. CNC's second-quarter 2025 results are slated to be released on July 25.
Year to date, CNC shares have lost 43.3% compared with the industry's decline of 24.4%.
Image Source: Zacks Investment Research
CNC currently carries a Zacks Rank #2 (Buy).
Some other top-ranked stocks in the Medical space are Clover Health Investments Corp CLOV, Fresenius Medical Care AG & Co. FMS and BrightSpring Health Services, Inc. BTSG, each sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today's Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Clover Health Investments' current-year earnings of 11 cents per share has witnessed one upward revision in the past 60 days against no movement in the opposite direction. Clover Health Investments beat earnings estimates in each of the trailing four quarters, with the average surprise being 114.6%. The consensus estimate for current-year revenues is pegged at $1.9 billion, indicating 37.7% year-over-year growth.
The Zacks Consensus Estimate for Fresenius Medical Care AG & Co.'s current-year earnings of $2.21 per share has witnessed two upward revisions in the past 30 days against no movement in the opposite direction. Fresenius Medical Care AG & Co. beat earnings estimates in three of the trailing four quarters and met once, with the average surprise being 6.6%. The consensus estimate for current-year revenues is pegged at $21.9 billion, implying 4.8% year-over-year growth.
The Zacks Consensus Estimate for BrightSpring Health Services' current-year earnings of 87 cents per share has witnessed four upward revisions in the past 60 days against no movement in the opposite direction. BrightSpring Health Services beat earnings estimates in two of the trailing four quarters and missed twice, with an average surprise being 17.5%. The consensus estimate for current-year revenues is pegged at $12.3 billion, indicating 9.1% year-over-year growth.
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Fresenius Medical Care AG & Co. KGaA (FMS) : Free Stock Analysis Report
Centene Corporation (CNC) : Free Stock Analysis Report
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