On May 28, 2014, Centene Corporation (NYSE: CNC) reached a new 52-week high of $74.60. The rally was attributable to the company's strong first-quarter 2014 earnings and efficient capital deployment activities.
Centene's solid first-quarter 2014 results comprised a 79.6% positive earnings surprise. Earnings also increased year over year driven by continued business expansion endeavors. Notably, this healthcare service provider has delivered positive earnings surprises in all of the last four quarters with an average beat of 26.6%.
Following Centene's earnings release on Apr 22, 2014, its shares gained 13.9% to close at $73.23 in the last trading session. The one-year return of the stock was 46.28%, much above the S&P 500's return of 15.76%.
Improved earnings in the first quarter also prompted this healthcare provider to raise its guidance for full-year 2014. The company acquired U.S. Medical Management in Jan 2014 to effectively cater to the high acuity populations. Including synergies from the deal, Centene now expects earnings in the range of $3.60–$3.90 per share, representing year-over-year growth of approximately 25–36%. The Zacks Consensus Estimate for full-year 2014 of $3.74 per share lies within the guided range.
Additionally, in May 2014, Centene's subsidiary IlliniCare Health (IlliniCare) was awarded a service contract with Cook County Health & Hospital Systems (CCHHS). This 5-year contract is expected to help the company reach out to more clients, thereby making way for revenue generation.
Centene's capital deployment initiatives have been impressive. The company deployed $2.0 million toward share repurchases in the first quarter. Centene's financial position remained strong at the first quarter-end, which should enable it to engage in more such endeavors.
Such business expansion and capital deployment keep us optimistic about the stock's performance. The Zacks Consensus Estimate for full-year 2014 ($3.74 per share) and 2015 ($4.49 per share) represents a year-over-year improvement of 26.7% and 20.2%, respectively.
Currently, Centene caries a Zacks Rank #3 (Hold). Some better-ranked players in the same sector, which look attractive at current levels, include Select Medical Holdings Corporation (NYSE: SEM), Health Net, Inc. (NYSE: HNT) and WellCare Health Plans, Inc. (NYSE: WCG). While Select Medical sports a Zacks Rank #1 (Strong Buy), Health Net and WellCare have a Zacks Rank #2 (Buy).
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CENTENE CORP (NYSE: CNC): Free Stock Analysis Report
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