Centene Corp.

Strong Q1 Performance: Centene reported first quarter adjusted diluted EPS of $2.90, aligning with expectations, and a strong premium and service revenue of $42.5 billion. The full-year adjusted EPS forecast remains unchanged at greater than $7.25. Premium and service revenue guidance is increased to a midpoint of $165 billion, up from $159 billion, driven by better-than-anticipated Medicare Advantage membership retention.

Medicaid Rate Adjustments and Challenges: Approximately 40% of Medicaid revenue received refreshed rates with an average increase of 4.5% at the beginning of the quarter. However, unexpected flu season costs of $130 million negatively impacted margins, resulting in an HBR (Health Benefit Ratio) of approximately 93.6% for Q1. The full-year Medicaid HBR is now projected to remain in the mid-to-high 91s, indicating progress but necessitating further improvement to achieve desired margins.

Market Trends and Legislative Risks: There is optimism regarding the bipartisan support for extending enhanced premium tax credits (APTCs) amid the national dialogue on healthcare reforms, which could avert a potential headwind estimated at around $1 per share if discontinued. However, work requirements in Medicaid could present operational complexities and state-level variability.