Centene: An Easy Pill to Swallow

The Affordable Care Act (ACA), also known as Obamacare, isn’t quite the magic pill America was looking to fix our healthcare system. In fact, according to a story reported on Tuesday in the Washington Post, there might be yet another average rate increase of 7.5% next year on some of America’s most popular programs sold through the ACA’s Healthcare Exchanges.

And, recent data compiled by the Department of Health and Human Services revealed that rate increases for next year will vary substantially across the United States. This means that the price hike for a person living in Ohio could be significantly higher than one for a person living in New York City. The biggest discrepancies appear to be occurring between rural and urban areas.

Now, this isn’t good news for America’s uninsured and underinsured. However, for investors, there is a silver lining to this dark cloud. This also means a handful of specialty healthcare providers are poised to truly profit from individuals and companies needing to find insurance rather than face a financial penalty. And nobody knows this better today than investors in Centene Corp. (CNC).

Even though Centene Corp. has already been in business for over three decades, the past few years have really seen its share price take off. Most of this is due to Centene’s goal of providing medical services for both the uninsured and the underinsured. This includes many recipients of Medicare, Medicaid and even the Health Insurance Marketplace, all of which have been affected by the Affordable Care Act’s mandates.

In fact, Centene’s focus on everything medical, including behavioral health, dental services and vision network services, led them to post a 7.7% earnings surprise before Tuesday’s opening bell. Now, that’s the kind of earnings announcement I like to see from one of my top Portfolio Grader stocks.

Now, yesterday’s earnings surprise is due in part to the company reporting a managed care membership increase of 24% as well as a 31% year-over-year revenue increase. The only dark cloud on the horizon was Centene’s posting of a slight miss in overall sales. However, even though sales might have been lower than analyst estimates, earnings, as I said before, are still well above the consensus estimate of $2.81 per share, which keeps Centene Corp. listed as an A-rated Strong Buy.


Louis Navellier

Louis Navellier

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