What Centene (CNC) Said on Its Q3 Earnings Call

Key Points

• Centene raised its 2026 outlook after third-quarter results beat expectations, reporting adjusted EPS of $0.58 and $45.1 billion in premium and service revenue. Full-year adjusted EPS is now expected to exceed $5.20, up from more than $4.80 previously.
• Medicare outperformed, prompting Centene to expect Medicare Advantage to break even in 2026—one year earlier than planned—and to raise its 2026 PDP margin forecast to the mid-to-high 3% range. Medicaid performance remained in line with expectations, despite membership declines and ongoing eligibility changes.
• Profitability and balance-sheet improvements continued: Marketplace margins are expected at the high end of the prior 4.5%–5% range, SG&A costs declined year over year, and total debt fell to $15.0 billion from $18.5 billion at the end of 2024.

Centene NYSE: CNC raised its full-year 2026 adjusted earnings outlook after reporting third-quarter results that exceeded its prior expectations, supported by stronger Medicare performance and in-line execution in Medicaid and commercial insurance.

The company reported third-quarter adjusted diluted earnings per share of $0.58 and $45.1 billion in premium and service revenue. Centene now expects adjusted diluted earnings per share of more than $5.20 for the full year, up from prior guidance of more than $4.80.

Chief Executive Officer Sarah London said the company’s third-quarter performance reflected outperformance in Medicare, while Medicaid and commercial operations performed in line with expectations. “We are pleased with the performance of our core businesses in the quarter and the momentum we are building across the portfolio,” London said.

Medicaid Results Track Expectations

Centene’s Medicaid health benefits ratio, or HBR, was 93.6% during the third quarter, improving 30 basis points sequentially from the second quarter. The company maintained its full-year Medicaid HBR forecast of approximately 93.5%.

Medicaid membership totaled 11.9 million at the end of the quarter, down 5% year to date. Centene continues to expect year-end membership to decline 8% to 9% from the end of 2025, reflecting eligibility changes, including implementation of requirements related to OB3 and the October transition of Florida Children’s Medical Services membership.

London said behavioral health, home health and high-cost drugs remain key areas of cost focus, though the company has seen stabilization in behavioral health trends and emerging stabilization in home health. She said Centene absorbed utilization pressure related to Florida’s Children’s Medical Services population and New York program changes without affecting its full-year outlook.

The company maintained its forecast for a roughly 5% composite Medicaid rate increase for 2026. Looking toward 2027, London said Centene has seen positive engagement with state Medicaid agencies on rate-setting, including discussions around accounting for potential acuity changes associated with work requirements.

“We see significant opportunity for margin restoration and sustainable long-term growth in Medicaid,” London said.

Medicare Strength Lifts Outlook

Centene’s Medicare segment posted an HBR of 93.8%, better than expected, with strength in both Medicare Advantage and standalone prescription drug plans, or PDPs. Chief Financial Officer Drew Asher said PDP performance accounted for the majority of the segment’s outperformance.

The company now expects its Medicare Advantage business to achieve break-even financial results in 2026, a year earlier than previously anticipated. Centene expects Medicare Advantage membership to decline year over year in 2027 as it narrows its footprint to populations and regions where it believes it can deliver differentiated products and improve margins.

For its PDP business, Centene increased its forecast for 2026 pre-tax margins to the mid-to-high 3% range, compared with its prior expectation of more than 3%. The company expects PDP enrollment to tilt toward growth during the current annual enrollment period.

Centene said its Medicare Advantage Star ratings results were in line with expectations. About 42% of members were in plans rated at least 3.5 Stars, while 10% were in four-Star plans. London said the company improved raw scores in several preventive-care and clinical-outcome measures despite pressure from program cut points.

Marketplace Margin Recovery Continues

Centene said its Marketplace business continued to improve following market disruption in 2025. The company now expects Marketplace to deliver a full-year pre-tax margin at the top of its previous 4.5% to 5% range.

The company said underlying Marketplace performance enabled it to absorb the impact of updated estimates for independent dispute resolution activity, program-integrity measures and unauthorized enrollments. Asher said the business is moving from a negative 1% pre-tax margin in 2025 to an expected 5% pre-tax margin in 2026.

Marketplace membership was slightly lower than the second quarter, and Centene expects to end 2026 with approximately 3.2 million members. London said the overall Marketplace could see modest contraction in 2027, though the company was still awaiting open enrollment results to determine its own membership outlook.

Centene said it expects continued margin expansion in Marketplace in 2027, supported by product positioning, tailored benefits and whole-health programs. The company said it did not expect a major shift in its overall metal-tier mix, although bronze plans remain an important component of its product portfolio.

Cost Discipline and 2027 Framework

Centene’s adjusted selling, general and administrative expense ratio was 6.5% in the third quarter, compared with 7.0% a year earlier. The company maintained its full-year 2026 SG&A ratio midpoint of 7.2%, reflecting expected fourth-quarter spending and seasonal enrollment-related costs.

Asher said Centene’s workforce and enterprise optimization efforts are expected to support a lower consolidated SG&A rate in 2027. The company has identified $480 million in related costs, largely recorded in the third quarter and excluded from adjusted results.

Centene reduced total debt to $15.0 billion, from $18.5 billion at the end of 2024, after repurchasing an additional $1.1 billion of senior notes since its second-quarter call. The company reported a debt-to-capital ratio of 41.1% at quarter end.

For 2027, Centene said it expects adjusted earnings per share to grow both from an approximately $4.70 adjusted baseline excluding certain nonrecurring 2026 benefits and from its updated 2026 guidance of more than $5.20. Potential tailwinds include improved Medicaid rate alignment, Marketplace margin expansion, Medicare Advantage profitability, PDP membership growth and improved SG&A performance.

Potential headwinds include Medicaid membership attrition tied to policy changes and a reset from unusually strong PDP margins in 2026. Centene plans to provide formal 2027 guidance when it reports fourth-quarter results in February.

About Centene (NYSE:CNC)

Centene Corporation is a diversified healthcare enterprise that provides government-sponsored and commercial health insurance programs and related healthcare services. The company's offerings are primarily focused on Medicaid, Medicare, and health insurance marketplace plans, with an emphasis on serving individuals and families who may have limited access to traditional healthcare coverage.

Centene operates Medicaid health plans through state-based contracts and offers Medicare Advantage, Medicare prescription drug, and Medicare Supplement products through its Wellcare brand.

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