Centene Gets S&P Rating Upgrade to BB+ from BB
May 18, 2017: S&P raises Centene’s rating one notch to BB+ from BB with an outlook rating of stable. “The rating upgrade on Centene reflects the company’s continued successful execution of its growth and profitability initiatives since we assigned a positive outlook two years ago (in May 2015)”, said Julie Herman, S&P Global credit rating analyst. Herman continued, “As a result, we believe Centene has increasingly differentiated itself favorably from its closest peers Wellcare and Molina, both of which we rate BB/Stable.”
The stable outlook on Centene reflects our expectation that the company will maintain its strong competitive position in the managed Medicaid market while continuing to diversify its profile, particularly in Medicare and specialty services. Consistent with our base-case economic forecast, we expect the company to show revenue growth of 5%-15% over the next two years, with an EBIT ROR of about 2.5%-3.5%. We expect financial leverage to remain elevated but to continue to drop year over year, reaching below 40% over the next two years. We expect consolidated GAAP capitalization to improve year over year through earnings growth, but remain modestly deficient at ‘BBB’ over the next two years. However, we expect consolidated risk-based capital levels to remain around 350%.
April 25, 2017: Centene reports Q1 EPS of $1.12 adj versus the $1.06 estimate. Revenue also beat coming in at $11.7 billion versus the $11.4 billion estimate. Quarter-end at-risk managed care membership came in at 12.1 million or +5% YoY.
February 7, 2017: Centene reports Q4 EPS of $1.19 versus the $1.12 estimate. Revenue also beat coming in at $11.9 billion versus the $10.9 billion estimate. Quarter-end at-risk managed care membership came in at 11.44 million versus 5.1 million last year representing an increase of 223% YoY, nice!
January 5, 2017: Centene Corporation announced today that its Pennsylvania subsidiary, Pennsylvania Health & Wellness, has been selected by the Pennsylvania Department of Human Services to serve Medicaid recipients enrolled in the HealthChoices program in three zones. Pending regulatory approval and successful completion of readiness review, the three-year agreement is expected to commence June 1, 2017. In April, Centene was originally selected to provide services in three zones for HealthChoices. Today’s award is in response to a re-issue of the HealthChoices award.
The Department completed an evaluation and scoring of the proposal and has selected Centene’s proposal for the Southeast Zone, the Southwest Zone, and the Lehigh Capital Zone of Pennsylvania. The HealthChoices program covers low-income children and families, individuals with disabilities, as well as those newly eligible under the Affordable Care Act expansion throughout the state of Pennsylvania.
In addition to the Health Choices Medicaid award, Centene was previously selected under a separate contract by the departments of Human Services and Aging to serve enrollees in the Community HealthChoices program statewide, pending regulatory approval and successful completion of readiness review. Under this agreement, Pennsylvania Health & Wellness will coordinate physical health and long-term services and supports (LTSS), if needed, to enhance the quality of medical care and access to all appropriate services to more than 420,000 individuals who are dually eligible for Medicare and Medicaid, older Pennsylvanians and individuals with disabilities.
January 3, 2017: Piper Jaffray/Simmons initiates coverage of Centene Corporation with an Overweight rating, and sets a price target of $67.
December 20, 2016: JPMorgan Chase and Co initiates coverage of Centene Corporation with an Overweight rating, and sets a price target of $75. JPMorgan also added Centene to its Analyst Focus List saying that while Republican “repeal/replace” efforts present some risk to both the Medicaid RPF pipeline and current Obamacare-population earnings, they believe the current valuation is more than discounting that risk.
Centene Corporation Stock Chart
The Finviz screener settings used to find Centene are: Sector Healthcare, Forward P/E Low (<15), EPS growth past 5 years High (>25%), Sales growth past 5 years High (>25%), Sales growth qtr over qtr 85% – 90%
Centene Corporation, a Fortune 500 company, is a diversified, multi-national healthcare enterprise that provides a portfolio of services to government-sponsored healthcare programs, focusing on under-insured and uninsured individuals.
Many receive benefits provided under Medicaid, including the State Children’s Health Insurance Program (CHIP), as well as Aged, Blind or Disabled (ABD), Foster Care and Long Term Care (LTC), in addition to other state-sponsored/hybrid programs and Medicare (Special Needs Plans). The Company operates local health plans and offers a range of health insurance solutions. It also contracts with other healthcare and commercial organizations to provide specialty services including behavioral health management, care management software, correctional healthcare services, dental benefits management, in-home health services, life and health management, managed vision, pharmacy benefits management, specialty pharmacy and telehealth services.