Centene lifts annual outlook, aims profit growth in 2026, shares rise

By Sneha S K and Sriparna Roy

Oct 29 (Reuters) - Centene CNC.N on Wednesday raised its 2025 adjusted profit forecast and said it looks to grow its earnings next year, sending shares of the health insurer nearly 11% higher.

The 2025 profit forecast came as a relief to investors after its July report, when the company booked a surprise quarterly loss and forecast 2025 profit below estimates.

In recent quarters, insurers have struggled with increasing medical costs in Affordable Care Act or Obamacare plans, which include a risk-adjustment reimbursement for insurers who cover a disproportionate share of sicker members.

Morningstar analyst Julie Utterback said that the fear of a forecast cut, similar to peer Molina, has not come to fruition, which is boosting shares.

Centene raised its 2025 adjusted profit forecast by 25 cents to at least $2.00 per share, above estimates of $1.68, as per data compiled by LSEG.

For the next year, CFO Drew Asher said the company will provide a forecast in early February and that it looks forward to "growing adjusted EPS in 2026." Analysts expect a profit of $3 per share.

MEDICAID COSTS BETTER THAN EXPECTED

Centene reported a Medicaid medical cost ratio, the percentage of premiums spent on medical care, of 93.4% compared with 93.1% last year, which analysts said was better than expected.

"We are pleased to be making real progress on our Medicaid margin improvement agenda, but we are certainly not declaring victory," said CEO Sarah London in a post-earnings conference call.

The total medical cost ratio stood at 92.7%, compared with a consensus of 92.8%, according to brokerage Guggenheim.

The company highlighted increased demand for behavioral health and home health services in Medicaid plans for low-income people.

It also said that high cost drug trends in those plans settled a little in the quarter, said CFO Drew Asher.

IMPAIRMENT CHARGE

Centene recorded a non-cash goodwill impairment of $6.7 billion to account for the anticipated impact of President Donald Trump's tax and budget bill, which will decrease funding for Medicaid starting in 2027, and a change in Obamacare plans if the COVID pandemic expanded subsidies expire at the end of 2025, as anticipated.

The company booked a net loss of $13.50 per share in the third quarter.

The analysis was prompted by market conditions and a 45% decline in its shares so far this year, it said.

It reported third-quarter adjusted profit of 50 cents per share, compared with analysts' average estimate of a loss of 14 cents.