Centene ((CNC)) has held its Q3 earnings call. Read on for the main highlights of the call.
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Centene’s recent earnings call conveyed a generally positive sentiment, highlighting strong performance in adjusted EPS and improvements in Medicaid HBR. However, the company also faced challenges, such as a significant goodwill impairment charge and ongoing medical cost pressures in the Marketplace segment.
Adjusted EPS Exceeds Expectations
Centene reported an impressive third quarter adjusted EPS of $0.50, surpassing previous expectations. This strong performance led the company to increase its full-year adjusted EPS forecast to at least $2, up from the prior estimate of $1.75.
Medicaid HBR Improvement
The Medicaid Health Benefits Ratio (HBR) showed a sequential improvement of 150 basis points, thanks to a $150 million positive revenue adjustment in Florida. This reflects Centene’s successful efforts in rate advocacy and program management.
Medicare Segment Consistency
Centene’s Medicare segment, including Medicare Advantage and PDP, performed consistently with expectations. The segment made progress in Star ratings and maintained a stable HBR of 94.3%.
SG&A Efficiency
The company achieved a strong adjusted SG&A expense ratio of 7.0% in Q3, compared to 8.3% last year. This improvement was driven by growth in PDP revenue and disciplined expense management.
Goodwill Impairment Charge
A notable challenge for Centene was the recording of a $6.7 billion non-cash goodwill impairment charge during the quarter, which impacted the GAAP loss per share.
Marketplace Medical Cost Pressure
The Marketplace segment experienced additional medical cost pressures in September, necessitating adjustments in Q4 provisions to address these challenges.
Challenges in Medicaid Drug Costs
Centene continued to face challenges in controlling high-cost drug trends within Medicaid, although some moderation was observed.
Forward-Looking Guidance
Looking forward, Centene provided updated guidance, emphasizing significant progress on financial goals. The company plans to drive EPS growth in 2026, focusing on margin improvement while navigating policy changes and market dynamics. The Medicare segment is on track for a 2027 breakeven target, and stronger-than-expected net investment income was reported for the third quarter.
In summary, Centene’s earnings call revealed a positive outlook with strong adjusted EPS performance and improvements in Medicaid HBR. Despite challenges like the goodwill impairment charge and medical cost pressures, the company remains focused on achieving its financial goals and driving future growth.