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What’s in the Cards for Centene (CNC) this Earnings Season?


Centene Corporation CNC will release first-quarter 2017 results on Apr 25, before the market opens. Last quarter, the company posted a positive earnings surprise of 6.25%. Let’s see how things are shaping up for this announcement.

Factors to be Considered this Quarter

Centene’s acquisition of Health Net in the last reported quarter is expected to have boosted its top line this time around.

The company’s new Medicaid contracts are likely have boosted the membership, in turn, bolstering revenue growth in the to-be-reported quarter.

The company also started Medicare Advantage plans in four new states in Jan 2017, which is likely to have contributed to revenue growth.

The company also remains committed toward enhancing shareholders’ value. To this end, it undertook share repurchases, which should impact the bottom line positively by reducing the outstanding share count.

However, the company’s merger with Health Net resulted in incurring substantial costs, which are likely to put pressure on the bottom line.

Health Net’s high Selling General and Administrative expenses are also expected to have increased its overallexpenses, limiting bottom-line growth.

Increasing costs related to extinguishment of debt, reserves for settlements, legal judgments and lawsuits, impairments of long-lived assets are anticipated to have affected earnings.

Earnings Whispers

Our proven model does not conclusively show that Centene is likely to beat on earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.

Zacks ESP: Centene has an Earnings ESP of -1.89%. This is because the Most Accurate estimate is pegged at $1.04, while the Zacks Consensus Estimate stands at $1.06. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Centene carries a Zacks Rank #3. Though the company has a favorable Zacks Rank, its negative Earnings ESP complicates surprise prediction.

We caution against Sell-rated stocks (Zacks Rank #4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some other companies from the medical sector that you may want to consider as these have the right combination of elements to post an earnings beat this quarter:

Amgen, Inc. AMGN, which is set to report first-quarter earnings on Apr 26, has an Earnings ESP of +1.99% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Anthem, Inc.ANTM has an Earnings ESP of +7.79% and a Zacks Rank #2. The company is set to report first-quarter earnings on Apr 26.

Humana, Inc. HUM has an Earnings ESP of +2.06% and a Zacks Rank #2 The company is set to report first-quarter earnings on May 3.

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