How much growth does Centene expect in adjusted EPS for 2025?

Centene guided to 2025 adjusted diluted EPS of greater than $7.25, which the company describes as more than 6% year-over-year growth from its reaffirmed 2024 adjusted diluted EPS guidance of greater than $6.80.

What is driving the difference between GAAP and adjusted EPS for 2025?

The 2025 GAAP diluted EPS guidance is greater than $6.19. The roughly $1.40 per share of amortization of acquired intangibles, less about $0.34 of income tax effects, accounts for the gap. The company does not expect other adjustments or acquisition-related expenses in 2025, unlike 2024, which included several one-time gains and costs.

Why is the health benefits ratio important for investors?

The HBR measures medical costs as a percentage of premium revenue, so it is the key indicator of underwriting profitability for a managed care company. Centene's 2025 HBR guidance of 88.4% to 89.0% is above the reaffirmed 2024 range of 88.3% to 88.5%, implying a slightly higher expected medical cost ratio that investors will want to see explained on the February 2025 earnings call.

What risks could cause Centene to miss its 2025 guidance?

Key risks cited include Medicaid redeterminations, changes to CMS Star ratings, the renewal or modification of enhanced ACA premium tax credits, government funding uncertainty, contract reprocurements and protests, medical utilization trends, cyber incidents, and pending legal or regulatory investigations. Centene states it will not update the guidance unless it publicly announces updated guidance.

CNC 8-K: Regulation FD — Dec 12, 2024

01—Abstract

Summary

Summary of the 8-K filed December 12, 2024. Cited figures are marked; the original filing is the authoritative source.

Centene Corporation (NYSE: CNC) furnished an 8-K on December 12, 2024 (Item 7.01, Regulation FD) announcing its 2025 financial guidance in conjunction with a virtual investor day.

The company guided to 2025 adjusted diluted EPS of greater than $7.25^a, representing more than 6% year-over-year growth from the reaffirmed 2024 adjusted diluted EPS guidance of greater than $6.80. Other 2025 guidance includes total revenues of $166.5B to $169.5B, premium and service revenues of $154.0B to $156.0B, GAAP diluted EPS of greater than $6.19, a health benefits ratio (HBR) of 88.4% to 89.0%, and diluted shares outstanding of 491.0 to 494.0 million. Centene also reaffirmed its 2024 premium and service revenue guidance ($143.5B to $144.5B) and HBR guidance (88.3% to 88.5%).

The 2025 HBR range is a useful focal point for investors, since medical cost trends drive margin performance in managed care. The 2025 guidance implies a modest expected increase in the HBR relative to 2024, and the adjusted EPS bridge shows that 2025 adjusted results exclude amortization of acquired intangibles (about $1.40^b per share) and carry no one-time items, which makes the 2025 GAAP-to-adjusted gap narrower than in 2024. The guidance is explicitly forward-looking and depends on factors including Medicaid redeterminations, CMS Star ratings, the renewal or modification of enhanced advanced premium tax credits under the ACA, government funding and contract procurements, and medical utilization trends.

The company stated that the guidance is effective only as of December 12, 2024, and will not be updated unless it publicly announces new guidance. Full-year 2024 results are scheduled for February 4, 2025.

02—Key points

Key Highlights

2025 adjusted diluted EPS guidance of greater than $7.25, up more than 6% from the reaffirmed 2024 guidance of greater than $6.80
2025 GAAP diluted EPS guidance of greater than $6.19, versus 2024 GAAP guidance of greater than $5.92
2025 total revenue guided to $166.5B–$169.5B and premium and service revenues to $154.0B–$156.0B, versus 2024 premium and service revenues of $143.5B–$144.5B
2025 health benefits ratio guided to 88.4%–89.0%, compared with the reaffirmed 2024 range of 88.3%–88.5%, a key margin metric to watch
2025 SG&A expense ratio of 8.1%–8.7% and effective tax rate of 21.5%–22.5% (adjusted 22.0%–23.0%)
Diluted share count guided to 491.0M–494.0M for 2025, indicating limited expected dilution
2024 results to be reported February 4, 2025; the investor day webcast was held the same day, December 12, 2024

03—Questions

Frequently Asked Questions

How much growth does Centene expect in adjusted EPS for 2025?
Centene guided to 2025 adjusted diluted EPS of greater than $7.25, which the company describes as more than 6% year-over-year growth from its reaffirmed 2024 adjusted diluted EPS guidance of greater than $6.80.
What is driving the difference between GAAP and adjusted EPS for 2025?
The 2025 GAAP diluted EPS guidance is greater than $6.19. The roughly $1.40 per share of amortization of acquired intangibles, less about $0.34 of income tax effects, accounts for the gap. The company does not expect other adjustments or acquisition-related expenses in 2025, unlike 2024, which included several one-time gains and costs.
Why is the health benefits ratio important for investors?
The HBR measures medical costs as a percentage of premium revenue, so it is the key indicator of underwriting profitability for a managed care company. Centene's 2025 HBR guidance of 88.4% to 89.0% is above the reaffirmed 2024 range of 88.3% to 88.5%, implying a slightly higher expected medical cost ratio that investors will want to see explained on the February 2025 earnings call.
What risks could cause Centene to miss its 2025 guidance?
Key risks cited include Medicaid redeterminations, changes to CMS Star ratings, the renewal or modification of enhanced ACA premium tax credits, government funding uncertainty, contract reprocurements and protests, medical utilization trends, cyber incidents, and pending legal or regulatory investigations. Centene states it will not update the guidance unless it publicly announces updated guidance.

04—Continue

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