Centene ((CNC)) has held its Q4 earnings call. Read on for the main highlights of the call.
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Centene’s recent earnings call showcased a robust financial performance for 2024, marked by significant revenue growth and enhanced earnings per share (EPS). The sentiment conveyed during the call was optimistic, though tempered by concerns over Medicaid membership and cash flow from operations. The company is also cautiously observing potential impacts from program integrity changes in the marketplace.
Revenue Growth and EPS Achievement
Centene reported a commendable fourth quarter adjusted diluted EPS of $0.80, culminating in a full year 2024 adjusted diluted EPS of $7.17. The company has also raised its revenue guidance for 2025 by $4 billion, signaling confidence in its financial trajectory.
Medicaid Rate Adjustments
The company revealed a mid-4% composite rate adjustment effective January 1, 2025, with expectations for a full-year 2025 composite rate adjustment of 3% to 4%. These adjustments are indicative of Centene’s strategic approach to maintaining competitive Medicaid rates.
Medicare Stars Improvement
Improvements in Medicare Stars ratings were highlighted, with 55% of Centene’s Medicare members now in plans rated 3.5 stars or higher, a significant increase from the previous year’s 23%.
Marketplace Execution
The Ambetter marketplace demonstrated strong performance in 2024, with January enrollment surpassing expectations. This positions Centene to reach a peak marketplace membership exceeding 5 million members.
Share Repurchase and Debt Management
In 2024, Centene repurchased 42 million shares for $3 billion, achieving a debt-to-adjusted EBITDA ratio of 2.9 times by the year’s end. This reflects the company’s strategic focus on enhancing shareholder value and managing debt efficiently.
Medicaid Membership and HBR Challenges
Centene faced challenges with its Medicaid Health Benefits Ratio (HBR), which increased slightly to 93.4% in Q4, with full-year HBR at 92.5%. Medicaid membership was stable, fluctuating between 12.9 and 13 million.
Operating Cash Flow Issues
The company reported operating cash flow of only $154 million for 2024, attributed to timing discrepancies in pharmacy rebate collections and risk adjustment payables.
Potential Impact of Program Integrity Changes
Centene is closely monitoring the effects of program integrity changes, such as failure to report and periodic data matching, which may impact membership figures in early 2025.
Forward-Looking Guidance
Centene’s guidance for 2025 is optimistic, with projections of an adjusted diluted EPS greater than $7.25 and anticipated revenue growth bolstered by Medicare and Medicaid expansions. The company expects improved Medicaid membership stability and a strong marketplace presence, with membership projected above 5 million early in the year.
In conclusion, Centene’s earnings call revealed a strong performance in 2024 with promising prospects for 2025. While the company faces challenges in Medicaid membership and cash flow, it remains proactive in addressing these issues. The overall sentiment is one of cautious optimism, supported by strategic initiatives aimed at driving future growth and value.
