Medical Expenses Erode Centene's Bottom Line in Rare Q2 Earnings Miss

Centene Corporation CNC reported second-quarter 2025 adjusted loss per share of 16 cents, which missed the Zacks Consensus Estimate of earnings of 68 cents, a rare feat. Moreover, the bottom line fell from the year-ago profit of $2.42 per share.The weak quarterly earnings took a hit from rising medical costs, declining service revenues, investment and other income and lower membership in Medicaid and Medicare businesses. The negatives were partially offset by solid premium growth and rate hikes.Revenues advanced 22.4% year over year to $48.7 billion. The top line beat the consensus mark by 10.9%.Centene Corporation Price, Consensus and EPS Surprise Centene Corporation price-consensus-eps-surprise-chart | Centene Corporation QuoteQuarterly Operational Update for CNCRevenues from Medicaid grew 7% year over year to $21.7 billion, while Medicare revenues of $9.5 billion soared 58% year over year in the quarter under review. Meanwhile, commercial revenues improved 18% year over year to $10.1 billion.Centene's premiums totaled $41.7 billion, which advanced 18.8% year over year on the back of higher premiums and expanding membership base in the PDP business, coupled with overall growth in the Marketplace business and Medicaid rate hikes. The metric surpassed the Zacks Consensus Estimate by 4.6%. Service revenues of $727 million decreased 12.7% year over year in the second quarter. The metric lagged the consensus estimate by 6.1%. Investment and other income dropped 19.9% year over year to $371 million, which missed our model estimate of $378.2 million.Total membership (excluding TRICARE) was 28 million as of June 30, 2025, which grew 8.9% year over year due to growing commercial members, partially offset by membership declines in the Medicaid and Medicare businesses. The metric beat the consensus mark by 0.8%.Centene’s health benefits ratio of 93% deteriorated 540 basis points year over year in the quarter under review and came above the consensus mark of 90.82%. Operating expenses totaled $49.2 billion, which escalated 27.4% year over year and came higher than our estimate of $44.1 billion. The year-over-year increase was due to higher medical costs, premium tax expense and selling, general and administrative expenses. Medical costs alone jumped 26.1% year over year.Adjusted net loss was recorded at $79 million against year-ago earnings of $1.3 billion.CNC’s Financial Update (As of June 30, 2025)Centene exited the second quarter with cash and cash equivalents of $14.5 billion, which advanced from the $14.1 billion figure at 2024-end. Total assets of $86.4 billion increased from the 2024-end level of $82.4 billion.Long-term debt amounted to $17.6 billion, which dipped from the $18.4 billion figure as of Dec. 31, 2024. The current portion of long-term debt totaled $25 million.Total stockholders’ equity of $27.5 billion fell from the 2024-end figure of $26.5 billion.Centene generated $3.3 billion of net cash from operations in the first half of 2025, up from $1.7 billion a year ago.Centene’s Share Repurchase UpdateCentene bought back common shares worth around $432 million in the second quarter of 2025.Centene currently has a Zacks Rank #5 (Strong Sell).You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Brief Peer ComparisonAmong its peers, Elevance Health, Inc. ELV reported second-quarter 2025 adjusted earnings per share (EPS) of $8.84, which missed the Zacks Consensus Estimate by 3.5%. The bottom line decreased 12.6% year over year. Medical membership of Elevance Health was around 45.6 million, which slipped 0.3% year over year. Total expenses of $47.5 billion rose 16.1% year over year and were higher than our estimate of $45.3 billion. Elevance Health also has a Zacks Rank #5 at present.UnitedHealth Group Incorporated UNH, a bellwether in the healthcare sector, is set to release its second-quarter 2025 results on July 29. Despite a projected 12.8% year-over-year increase in total revenue to $111.55 billion, its UnitedHealthcare unit is expected to have positioned the company for a significant year-over-year decline in profits. The Zacks Consensus Estimate for UnitedHealth’s second-quarter earnings is pegged at $4.84 per share, representing a steep 28.8% decline from $6.80 a year ago. UnitedHealth currently has a Zacks Rank #4 (Sell).#1 Semiconductor Stock to Buy (Not NVDA)The incredible demand for data is fueling the market's next digital gold rush. As data centers continue to be built and constantly upgraded, the companies that provide the hardware for these behemoths will become the NVIDIAs of tomorrow.One under-the-radar chipmaker is uniquely positioned to take advantage of the next growth stage of this market. It specializes in semiconductor products that titans like NVIDIA don't build. It's just beginning to enter the spotlight, which is exactly where you want to be.See This Stock Now for Free >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report UnitedHealth Group Incorporated (UNH): Free Stock Analysis Report Centene Corporation (CNC): Free Stock Analysis Report Elevance Health, Inc. (ELV): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks