Centene: Stock Slides as Withdrawn 2025 Guidance Adds Uncertainty to Near-Term Prospects

Key Morningstar Metrics for Centene

• Fair Value Estimate: $84.00
• Morningstar Rating: ★★★★
• Morningstar Economic Moat Rating: None
• Morningstar Uncertainty Rating: Very High

Centene Stock Update

Centene CNC withdrew its guidance, primarily due to challenges in its individual plans, including elevated medical utilization, which is also plaguing the Medicaid market. Management quantified the known EPS risks in 72% of its individual members at $2.75 of its withdrawn 2025 view of at least $7.25.

Why it matters: Centene shares fell nearly 25% in after-hours trading on this July 1 news, which followed the trading session in which the shares rose 4% despite the Senate passing a budget reconciliation bill that threatens spending in the company’s core Medicaid market and would allow individual plan subsidies to expire.

• We estimate that risks to Centene’s 2025 earnings per share could extend beyond that $2.75 currently quantified by management as the company gets more clarity on medical utilization in the rest of its individual plan and Medicaid populations.
• Also, we suspect Centene’s earnings may not bounce back fully in 2026, as only a “substantial majority” of individual plan rates will be adjusted for 2026, and Medicaid margins may take longer to normalize than previously anticipated.

The bottom line: We are lowering our fair value estimate for no-moat Centene to $84 per share from $92 based solely on these developments, which cut into the company’s near-term profit prospects. The shares remain moderately undervalued for the risks, in our view.

• But risks have risen, in our opinion, and we are increasing our Uncertainty Rating to Very High from High, given the company’s near-term execution concerns, its significant debt leverage, and other regulatory risks.
• On the regulatory front, another high-single-digit percentage of share value could be at risk if Congress crosses the finish line with its budget reconciliation bill. The House and Senate both narrowly passed different versions of these bills but still need to agree on terms in both chambers.