Centene’s Earnings Call: Growth Amid Challenges

Centene ((CNC)) has held its Q1 earnings call. Read on for the main highlights of the call.

Centene Corporation’s recent earnings call paints a picture of a company experiencing robust growth but facing some challenges. The sentiment expressed during the call was balanced, highlighting significant revenue growth and membership retention while acknowledging the pressures from increased medical expenses and high specialty drug costs.

Strong Premium and Service Revenue Growth

Centene reported impressive premium and service revenue for the first quarter of 2025, totaling $42.5 billion. This performance has led the company to increase its full-year revenue guidance to a midpoint of $165 billion, up from the previous $159 billion. This growth underscores Centene’s ability to capitalize on market opportunities and expand its financial outlook.

Adjusted EPS Consistent with Expectations

The company’s first quarter adjusted diluted EPS was reported at $2.90, which aligns with prior expectations. This consistency supports Centene’s full-year 2025 adjusted EPS outlook of greater than $7.25, reinforcing investor confidence in the company’s financial stability and strategic direction.

Membership Growth in Medicare Advantage and Commercial Segments

Centene experienced notable membership growth in its Medicare Advantage and commercial segments. Better-than-expected retention in Medicare Advantage contributed to a $1 billion increase in revenue outlook for 2025, while strong enrollment in the commercial segment added $5 billion to premium revenue guidance.

Medicaid Contract Wins

The company secured significant Medicaid contracts in Illinois and Nevada, showcasing the strength of its service model. These wins not only expand Centene’s footprint in rural areas but also demonstrate its competitive edge in the Medicaid market.

Impact of Flu Season on Medical Expenses

Centene faced $130 million in additional medical expenses due to a more active flu season, which impacted Medicaid results in the first quarter. This highlights the ongoing challenge of managing medical costs in the face of unpredictable seasonal health trends.

High Specialty Drug Costs

Specialty drug costs continue to pressure Centene’s margins, particularly among non-low-income PDP members. This issue, driven partly by pharmaceutical industry behavior, remains a critical area for future pricing strategies.

Challenges in Medicaid MLR Improvement

Despite progress in Medicaid rate improvements, the full benefits were offset by the flu season and high-cost drugs. These challenges underscore the need for continued focus on managing medical loss ratios effectively.

Forward-Looking Guidance

Looking ahead, Centene maintains its full-year 2025 adjusted EPS outlook at greater than $7.25 and has increased its full-year revenue forecast by $6 billion. The company is focused on improving the Health Benefit Ratio through rate adjustments and managing medical expenses. Centene anticipates a full-year composite Medicaid rate increase of over 4% and is actively engaging with states to align rates with member acuity.

In summary, Centene’s earnings call reflects a company in a strong growth phase, with significant revenue and membership gains. However, challenges such as increased medical expenses and high specialty drug costs remain. The company’s forward-looking guidance suggests a continued focus on strategic growth and cost management, positioning Centene for future success.