What Happened?
Shares of health coverage company Centene (NYSE: CNC) fell 2.9% in the afternoon session after the company highlighted a significant challenge for its Marketplace business during a recent investor conference.
At the Deutsche Bank Healthcare Summit on September 11, CEO Sarah London discussed a "$2.4 billion risk adjustment headwind" facing the company's Marketplace segment, overshadowing positive updates in its Medicaid and Medicare businesses and a reaffirmation of its full-year EPS forecast. Adding to investor concerns are broader industry pressures, with reports indicating that health insurance costs are set for their largest increase in years. Insurers point to potential tariffs on pharmaceutical imports and the high cost of new obesity treatments as key drivers of rising expenses. While Truist Securities raised its price target for Centene on Friday, this positive note was tempered by recent price target cuts from several other firms, including Barclays and JP Morgan, contributing to a consensus "Hold" rating from analysts.
The shares closed the day at $33.26, down 2.5% from previous close.
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What Is The Market Telling Us
Centene’s shares are quite volatile and have had 16 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 1 day ago when the stock gained 11.8% on the news that the company reaffirmed its optimistic 2025 earnings outlook and shared positive early data on its Medicare quality ratings.
The health insurer maintained its projection of approximately $1.75 in adjusted diluted earnings per share for 2025, which is significantly above the consensus analyst forecast of $1.64. Adding to the positive news, CEO Sarah London said at a conference that preliminary data for its Medicare quality scores, known as star ratings, were in line with expectations. The update also showed a slightly higher percentage of members in four-star plans, which are eligible for bonus payments. The company stated that its financial results through August were consistent with its full-year guidance, citing positive Medicaid results for July and August. Following the news, Barclays reiterated its Equalweight rating on the stock.
Centene is down 45% since the beginning of the year, and at $33.26 per share, it is trading 56.6% below its 52-week high of $76.57 from September 2024. Investors who bought $1,000 worth of Centene’s shares 5 years ago would now be looking at an investment worth $571.28.
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