The Top 5 Analyst Questions From Centene's Q1 Earnings Call

Yahoo

23-06-2025

Centene's first quarter results outpaced Wall Street's expectations for both revenue and profit, but the market responded negatively, reflecting investor concerns about underlying trends. Management attributed the quarter's performance to strong premium growth and higher-than-expected membership, particularly in the commercial and Medicare segments. However, CEO Sarah London emphasized that a more active flu season increased costs in Medicaid, offsetting some underlying improvements. London noted, 'Medicaid, flu, and ILI drove $130 million of incremental medical expense in the quarter beyond our initial expectations.' The company also faced continued pressure from high-cost specialty drugs, which weighed on medical margins.
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Revenue: $46.62 billion vs analyst estimates of $43.03 billion (15.4% year-on-year growth, 8.3% beat)
Adjusted EPS: $2.90 vs analyst estimates of $2.52 (15.3% beat)
Adjusted EBITDA: $1.85 billion vs analyst estimates of $1.58 billion (4% margin, 17.2% beat)
Management reiterated its full-year Adjusted EPS guidance of $7.25 at the midpoint
Operating Margin: 3.3%, in line with the same quarter last year
Customers: 27.94 million, down from 28.6 million in the previous quarter
Market Capitalization: $27.07 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Josh Raskin (Nephron Research) asked about the nature and containment of flu-related costs. CEO Sarah London clarified the $130 million figure was isolated to Medicaid and tracked using consistent definitions, with most of the impact limited to Q1.
A.J. Rice (UBS) inquired about the sensitivity to policy shifts, specifically the expiration of premium tax credits and potential Medicaid work requirements. London affirmed the estimated $1 per share impact remains valid and noted high variability depending on state-level implementation.
Justin Lake (Wolfe Research) questioned risk adjustment trends and whether new commercial members exhibited different risk profiles. CFO Drew Asher reported consistency with past estimates and emphasized a prudent approach until more data arrives in late Q2.
Ed Haines (Mizuho Securities) sought clarity on Medicaid rate negotiations for the second half and whether any utilization trends outside flu were running higher than expected. London pointed to ongoing constructive discussions, while Asher highlighted behavioral health and high-cost drugs as areas of continued monitoring.
Sarah James (Cantor Fitzgerald) asked if new exchange members were driving higher medical loss ratios beyond typical new member patterns. London responded that renewal members were as expected, and that increased utilization among new members had been incorporated into the full-year outlook.
In upcoming quarters, our analysts will closely watch (1) the pace and effectiveness of Medicaid rate increases as states process post-redetermination acuity shifts, (2) congressional actions on enhanced premium tax credits, which could reshape the marketplace segment, and (3) specialty drug cost trends, particularly in Medicare and Medicaid plans. The impact of CMS rule changes and risk corridor adjustments in prescription drug plans will also be important markers for Centene's margin trajectory.
Centene currently trades at $54.71, down from $61.52 just before the earnings. At this price, is it a buy or sell? See for yourself in our full research report (it's free).
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