Centene's Q4 Earnings: A Mixed Bag, but Membership Growth Drives Revenue

Centene Corporation (NYSE: CNC), a leading healthcare enterprise, reported its fourth-quarter and full-year 2024 financial results on February 4, 2025. The company's earnings performance was a mix of positive and negative aspects, with some key metrics exceeding expectations while others fell short. Here's a snapshot of Centene's Q4 earnings and the underlying trends that drove its financial performance.

Q4 Earnings Highlights

* Adjusted diluted EPS: $0.80, up from $0.56 in Q3 2024
* Total revenues: $40.81 billion, up from $39.46 billion in Q3 2024
* Premium and service revenues: $36.296 billion, up from $35.338 billion in Q3 2024
* Health benefits ratio: 89.6%, up from 89.2% in Q3 2024
* SG&A expense ratio: 8.9%, down from 9.9% in Q3 2024
* Total cash flow used in operations: ($587 million), compared to $217 million in Q3 2024

Key Drivers Behind Centene's Q4 Performance

1. Membership Growth: Centene's membership increased significantly in both the Marketplace and Medicare PDP segments. The company reported a 22% increase in Marketplace membership and a 49% increase in Medicare PDP membership compared to the third quarter of 2023. This growth in membership drove higher premium and service revenues, contributing to the overall revenue growth.
2. Operational Efficiencies: Centene's health benefits ratio improved to 89.6% in Q4 2024, up from 89.2% in Q3 2024. This improvement indicates that the company has been successful in managing its costs and improving operational efficiency. The SG&A expense ratio also decreased to 8.9% in Q4 2024, down from 9.9% in Q3 2024, further demonstrating the company's focus on cost management.
3. Capital Deployment: Centene continued its capital deployment strategy, repurchasing $1.2 billion of shares during the third quarter of 2024 and an additional $380 million in October, bringing full-year repurchases to $2.4 billion through October 2024. This capital deployment strategy has helped the company maintain its share price and return value to shareholders.
4. RFP Wins and Medicare Stars Improvements: Centene's success in winning RFPs and improving its Medicare Stars ratings contributed to its overall financial performance. The company reported that approximately 46% of its Medicare Advantage membership was enrolled in plans rated 3.5 stars or higher, compared to approximately 23% in the prior year. This improvement in Medicare Stars ratings is consistent with internal expectations and demonstrates the company's commitment to quality and customer satisfaction.

Challenges and Outlook

While Centene's Q4 earnings performance was mixed, the company remains confident in its full-year outlook for adjusted diluted EPS of greater than $6.80. Centene's diversified portfolio and operational efficiencies have positioned the company to capture long-term growth opportunities in government-sponsored healthcare. The company's focus on cost management, capital deployment, and membership growth will continue to drive its financial performance in the coming years.

In conclusion, Centene's Q4 earnings performance was a mix of positive and negative aspects, with membership growth and operational efficiencies driving revenue growth. The company's focus on cost management, capital deployment, and membership growth will continue to drive its financial performance in the coming years. Despite the challenges faced in the quarter, Centene remains confident in its full-year outlook and is well-positioned to capture long-term growth opportunities in government-sponsored healthcare.