Centene (NYSE: CNC) reported Q3 EPS of $1.79, $0.02 better than the analyst estimate of $1.77. Revenue for the quarter came in at $16.18 billion versus the consensus estimate of $16.03 billion.

Michael F. Neidorff, Centene's Chairman and Chief Executive Officer, stated, "The Company continues to execute on its growth strategy. The operating metrics were strong, excluding some offsetting adjustments associated with expired contracts. Overall, we are very pleased with the results and have good momentum heading into the fourth quarter and 2019."

The third quarter results include the following items, which in the aggregate had no net effect on diluted EPS:

• During the third quarter, the Company received 2014-2017 cost reconciliation information related to the California Medicaid in-home support services (IHSS) program, which ended December 31, 2017. As a result, the Company\'s third quarter results include an estimated pre-tax benefit of $140 million related to the IHSS program reconciliation. The 2014-2016 reconciliation is expected to be finalized by early 2019, with the final 2017 reconciliation to follow.
• September 30, 2018 represented the previously announced expiration of the Company\'s contract to provide health care coordination services to the U.S. Department of Veterans Affairs under the Patient-Centered Community Care and Veterans Choice Programs. In connection with the conclusion of the contract, the Company recorded a pre-tax charge of $110 million for negotiated settlements and severance costs. The Company will continue to provide close out and transition services through 2021.
• The Company recorded pre-tax expense of $30 million associated with a contribution commitment to its charitable foundation.

Third Quarter Highlights

• September 30, 2018 managed care membership of 14.4 million, an increase of 2.1 million members, or 17%, over September 30, 2017.
• Total revenues for the third quarter of 2018 of $16.2 billion, representing 36% growth, compared to the third quarter of 2017.
• Health benefits ratio (HBR) of 86.3% for the third quarter of 2018, compared to 88.0% in the third quarter of 2017.
• Selling, general and administrative (SG&A) expense ratio of 12.6% for the third quarter of 2018, compared to 9.0% for the third quarter of 2017.
• Adjusted SG&A expense ratio of 10.0% for the third quarter of 2018, compared to 8.9% for the third quarter of 2017.
• Diluted EPS for the third quarter of 2018 of $0.09, compared to $1.16 for the third quarter of 2017.
• Adjusted Diluted EPS for the third quarter of 2018 of $1.79, compared to $1.35 for the third quarter of 2017.
• Operating cash flow of $548 million for the third quarter of 2018.

GUIDANCE:

Centene sees FY2018 EPS of $6.90-$7.10, versus the consensus of $7.07. Centene sees FY2018 revenue of $59.8-60.3 billion, versus the consensus of $59.83 billion.

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