Centene (NYSE: CNC) reported Q3 EPS of $1.27, $0.31 better than the analyst estimate of $0.96. Revenue for the quarter came in at $29.1 billion versus the consensus estimate of $28.23 billion.

Third Quarter Highlights

• September 30, 2020 managed care membership of 25.2 million, an increase of 9.9 million members, or 65%, over September 30, 2019.
• Total revenues of $29.1 billion for the third quarter of 2020, representing 53% growth compared to the third quarter of 2019.
• Health benefits ratio (HBR) of 86.4% for the third quarter of 2020, compared to 88.2% in the third quarter of 2019.
• Selling, general and administrative (SG&A) expense ratio of 9.1% for the third quarter of 2020, compared to 8.9% for the third quarter of 2019.
• Adjusted SG&A expense ratio of 8.9% for the third quarter of 2020, compared to 8.8% for the third quarter of 2019.
• Diluted EPS for the third quarter of 2020 of $0.97, compared to $0.23 for the third quarter of 2019.
• Adjusted diluted EPS for the third quarter of 2020 of $1.26, compared to $0.96 for the third quarter of 2019.
• Operating cash flow of $(952) million for the third quarter of 2020, reflecting the payment of the health insurer fee and the 2019 risk adjustment liability, as expected. Cash flow provided by operations for the nine months ended September 30, 2020, was $2.5 billion, or 1.4 times net earnings.

"We reported strong third quarter results with revenues up 53% as a result of the WellCare acquisition as well as product and geographic expansions, new programs and growth in many of our states," said Michael F. Neidorff, Chairman, President and Chief Executive Officer of Centene.

"As we benefited from the one-time risk corridor settlement this quarter, we've made the decision to reinvest the proceeds in the growth of our business as well as the communities in which we serve and live. Looking ahead, we expect our underlying businesses to continue to perform well in an uncertain environment and remain focused on executing our growth strategy across our diversified healthcare enterprise."

GUIDANCE:

Centene sees FY2020 EPS of $4.90-$5.06, versus the consensus of $4.87. Centene sees FY2020 revenue of $109.8-111.4 billion, versus the consensus of $110.49 billion.

The Company's annual adjusted diluted EPS guidance has been increased by $0.12 to reflect the favorable tax settlement recorded in the third quarter. The Company's annual adjusted diluted EPS guidance reflects the third quarter net benefit of $0.17 per diluted share for the risk corridor and charitable contribution commitment to the Company's foundation, offset by $0.17 per diluted share for growth and profitability initiative expenses associated with our Medicare and Marketplace businesses to be recorded in the fourth quarter.

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