UBS has upgraded Centene Corporation's shares from Neutral to Buy, raising the price target to $80.00, citing the stock's undervaluation despite potential challenges ahead. The healthcare provider's strong financial health and growth strategies in Medicaid and Medicare are expected to drive earnings, with a projected EPS of $8.00 in 2026. Centene's current trading position near its 52-week low and a P/E ratio of 10x suggest significant upside potential, as UBS believes market expectations for 2026 EPS are overly pessimistic.
The killing of UnitedHealthcare CEO Brian Thompson has prompted significant security changes among health insurers, including Centene's shift to a virtual investor day and the removal of executive photos from websites. Experts suggest that companies are reevaluating security measures for executives, recognizing the increased risks associated with public events and online visibility. This tragic incident has led to heightened awareness and proactive steps to ensure the safety of corporate leaders.
Centene President Ken Fasola will retire on July 1, 2024, transitioning to a strategic adviser role until his retirement. Joining Centene in 2022 after its acquisition of Magellan Health, Fasola previously held various leadership positions in healthcare, overseeing health plans and core operations. The company expressed gratitude for his 40-year career impact.
Centene's shares rose after the company reported a third-quarter profit of $713 million and revenue of $42 billion, surpassing Wall Street expectations. This marks an increase from $469 million in profit and $38 billion in revenue in the same quarter last year. The insurer's total membership grew to 28.6 million, driven by improvements in Medicare Advantage star ratings and Medicaid contract wins in states like Iowa, Pennsylvania, and Florida. Centene anticipates earnings per share of at least $6.80 and revenue between $159 billion and $161 billion for 2024.
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