Centene rises, Molina slides following Florida’s managed Medicaid awards

Shares of health care facilities and managed care are in the spotlight on Monday after Florida announced late on Friday five winners of six-year Medicaid managed care contracts. Among the winners are Centene (CNC), Elevance Health (ELV) and Humana (HUM), while CVS (CVS), Molina Healthcare (MOH) and UnitedHealth (UNH) lost share. Barclays sees the news as a “big win” for Centene and a “disappointing loss” for Molina.

MEDICAID MANAGED CARE PROGRAM: Late Friday, Florida announced intended awards in the re-procurement of its statewide 3.5M member and about $20B annual premium Medicaid Managed Care program. The state intends to award contracts to Centene, Humana, Elevance Health, Florida Community Care, and South Florida Community Care. This represents a consolidation from nine plans currently serving program with CVS, Molina, UnitedHealth, and AmeriHealth set to exit.

Wells Fargo upped Overweight-rated Centene’s price target to $93 from $89, while lowering Equal Weight-rated Molina’s to $410 from $440 after the news. Following a stretch of disappointing RFP results for Centene and the possibility for structural disadvantage in Florida given high share post WCG acquisition, the firm’s sense is that the loss of 50% of the contract was priced in. While one strong result doesn’t make a trend, it is encouraging and should help increase confidence that RFP performance almost certainly could not have remained as challenged, Wells argues. The firm sees this outcome most disappointing for Molina given the expectation for share gains.

Also commenting on the news, Barclays said that Florida RFP award was a “big win” for Centene as it helps to significantly de-risk the RFP pipeline, and a “disappointing loss” for Molina. Voicing a similar opinion, Mizuho noted that Florida’s awards were the most positive for Centene given investor expectations that the company would lose market share in the state, followed by Humana and Elevance due to the opportunity to gain market share. The firm views the contract losses as a modest negative for Molina, UnitedHealth, and CVS, but assumes the impact will be less than (-1%) to EPS for each company.

PRICE ACTION: In morning trading, shares of Centene have gained over 3% to $73.05, while Molina’s stock has slipped more than 4% to $359.03.