Centene Corporation (NYSE:CNC) is one of the 10 Best Value Stocks to Buy According to Billionaires. On July 2, BofA Securities reduced its price objective on the company’s stock to $52.00 from $65.00, while maintaining a “Neutral” rating. The reduction in price target comes after Centene Corporation (NYSE:CNC)’s withdrawal of its 2025 guidance as a result of higher acuity in its Marketplace population, as well as higher-than-anticipated Medicaid trend, added the firm. It highlighted that the company saw better-than-anticipated trends in Medicare Advantage business.
A doctor holding a clipboard in a hospital ward, discussing patient treatment plan with the nurses.
For Q1 2025, Centene Corporation (NYSE:CNC) highlighted that premium and service revenues went up by 17% to $42.5 billion from $36.3 billion in the comparable period of 2024. This rise was mainly aided by premium and membership growth in the PDP business, together with healthy product positioning and overall market growth in the Marketplace business. At March 31, 2025, Centene Corporation (NYSE:CNC) had cash, investments, and restricted deposits of $37.0 billion, while it maintained $198 million of cash and cash equivalents in its unregulated entities. In Q1 2025, the company saw Membership increases of 29% in Marketplace and 22% in Medicare PDP as compared to Q1 2024.
River Road Asset Management, an investment management company, released its Q4 2024 investor letter. Here is what the fund said:
“The holding with the lowest contribution to active return was Centene Corporation (NYSE:CNC) , a managed care organization (MCO) specializing in government-sponsored plans. Historically, health insurance has been a steady business that generates consistent free cash flow (CNC has produced positive FCF since 1998), and we believe CNC stands out as the prime MCO beneficiary of any future economic weakness. The company is the leading provider of Medicaid managed care plans with 17% market share, and it also owns the leading individual exchange franchise. When the economy stumbles, CNC’s revenues should increase as more individuals qualify for CNC’s plans. We are particularly encouraged by the new management’s focus on shareholder value–since the founder stepped down in Q4 2021, the company has divested seven businesses for more than $3.5B and deployed the proceeds into share repurchases.
Despite these strong long-term fundamentals, Centene’s stock declined. This was primarily due to ongoing challenges in its Medicaid business, where the medical loss ratio continued to deteriorate due to a mismatch between reimbursement rates and patient acuity following redeterminations, with Medicaid membership declining -14% even as exchange enrollment grew 22%. While management remains confident this pressure is temporary and all states have acknowledged the need to adjust rates to match patient acuity, investors remained concerned about the timing of this recovery. The stock was further pressured by broader health care sector headwinds, including potential policy risks from a Republican sweep and changes to Medicare Part D prescription drug plans. Even though the company maintained its fiscal year (FY) 2024 adjusted earnings per share (EPS) guidance of over $6.80 and executed significant share repurchases of $1.6B in Q3 and October (~4.7% of shares outstanding), the stock traded at just 9.4x forward earnings, well below its five-year average of 12x, reflecting near-term investor skepticism. We maintained the position.”
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