Centene Stock Up 5% After First Loss In 13 Years, Bullish Guidance

Shares of Centene have been on a roller coaster.

When I wrote earlier this month about the managed-care company, which offers services through Medicaid, Affordable Care Act plans and Medicare, the stock had lost 40% of its value. That was a week after the company withdrew its earnings guidance for 2025, citing rising Medicaid costs and problems in the ACA business.

Shares fell another 14.5% before the market opened on Friday, after the company reported a surprise loss due to surging medical costs, reported CNBC.

However, Centene stock popped nearly 6% Friday afternoon once the company offered new 2025 earnings guidance during an investor conference call.

Centene will earn an “adjusted profit of approximately $1.75 per share for the full year 2025,” CEO Sarah London said, according to a Reuters report, and the company will deliver “margin improvement across all three of its core lines of business in 2026.”

This announcement comes as welcome news to Centene investors – the shares have lost 53% of their value so far this year. However, based on my analysis a few weeks ago, Centene will have to overcome hurricane level headwinds to recover that lost value.

Centene’s Q2 Performance And Prospects

Centene reported a large, unexpected loss and restored earnings guidance for 2025 – at a much lower level than before the guidance withdrawal.

Here are the key numbers:

Second-quarter 2025 revenues: $48.74 billion – up 22% and 10.93% more than the Zacks Consensus Estimate.
Q2 2025 medical cost ratio: 93% – 3.7 percentage points above Wall Street’s expectation of 89.3%, CNBC noted.
Q2 adjusted loss per share: $0.16 – far worse than the $0.86 LSEG consensus profit, CNBC reported.
2025 adjusted EPS projection: $1.75 — “a fraction of the prior figure of at least $7.25,” wrote the Wall Street Journal.

Centene was not happy. “We are disappointed by our second-quarter results, but we have a clear understanding of the trends that have impacted our performance, and are working with urgency and focus to restore our earnings trajectory,” London said, according to Yahoo! Finance.

One analyst expected Centene to report a lower MCR. “The medical cost ratio for the quarter was surprisingly high and appeared related to all major lines of business, although its individual exchange business was likely the biggest culprit,” Morningstar analyst Julie Utterback told CNBC.

Centene told investors the high MCR was due to increased medical spending in a variety of categories. The company’s Medicaid costs – including behavioral health spending for people with autism, home health, and expensive cancer and gene therapies – all increased. Centene also incurred rising ACA costs, the Wall Street Journal reported.

Centene applied for rate increases. The company is “seeking higher payments from state Medicaid agencies and refiling rate requests across its ACA states to seek larger premiums in 2026,” according to the Journal.

Where Will Centene Stock Go From Here?

The insurance industry is likely to become more unstable due to the passage of the Big Beautiful Bill Act which could cut $1 trillion out of Medicaid, noted my Forbes post. Moreover, the number of people signed up for ACA plans is likely to fall in 2026 due to a “drop-off in federal subsidies,” the Journal reported.

Today’s results do not reduce the hurricane force headwinds facing Centene. These include the risk of an S&P Global cut in Centene’s credit rating to junk status and the pressure on Centene’s revenue – due to the One Big Beautify Bill Act’s reduction in Medicaid spending – which accounted for 62% of the company’s 2024 revenue.

Investors should consider the questions I asked Centene – which remain unanswered:

Will S&P Global cut Centene’s credit rating to junk status?
If so, how much will Centene’s cost of capital rise?
How will Centene’s net cash flow be affected by this?
If the BBBA cuts $1 trillion from Medicaid, how much will Centene’s revenue and net income drop?
Can Centene offset that drop with other business lines? If so, how?

Here is some good news for Centene bulls. The stock would have to rise 44% to reach the average price target of $42.23 from 15 Wall Street analysts, according to TipRanks.