Centene (CNC) — a Top Pick for 2023 — is an international healthcare company; the firm offers services to government-sponsored and commercial healthcare providers, notes John Staszak, an analyst with Argus Research.
Centene — based in St. Louis —has an emphasis on underinsured and uninsured individuals. The company is the largest Medicaid managed care organization in the U.S. and a leading provider of insurance under the Affordable Care Act.
The company has grown primarily through the acquisition of other health plans and services, including Magellan Health Care for $2.2 billion in January 2022, and Medicare insurer WellCare for $19.6 billion in January 2020.
Management now projects EPS of $5.65-$5.75, up from a prior $5.60-$5.75. This is the fourth time this year that management has raised guidance. Reflecting recent contract wins in North Carolina, management's guidance, and positive earnings surprises in five of the past six quarters, we are keeping our EPS estimates at $6.00 for 2022 and $6.80 for 2023. Our long-term earnings growth rate estimate is 15%.
We think that CNC shares are attractively valued at recent prices, above the midpoint of their 52-week range of $61-$99. On a technical basis, the shares have been in a long-term bullish pattern of higher highs and higher lows that dates to September 2019, though they have fallen sharply with the market since mid-August.
On a fundamental basis, the shares are trading at about 12.7-times our 2023 EPS estimate, near the midpoint of the historical range of 10-16. Compared to the peer group, the shares are trading at below-average multiples, which we think is unwarranted given the company's strong growth prospects. We are maintaining our "buy" rating and raising our target price to $99.
