Centene (CNC) reported blowout second-quarter earnings, but the stock fell sharply after reporting big ObamaCare-related losses for Health Net.
The Medicaid-focused health care provider also poured cold water on speculation that it would bid on assets put up for sale to clear the way for mergers, such as those being attempted by Aetna (AET) and Humana (HUM) or by Anthem (ANTM) and Cigna (CI).
Second-quarter earnings per share surged 70% to $1.29, well above views for $1.09, and the company's full-year EPS guidance of $4.20-$4.55 was above forecasts for $4.10. The company's health benefits ratio -- the amount of income paid out for insurance claims -- was 86.6%, better than 89.1% a year earlier.
Revenue nearly doubled to $10.987 billion, above estimates for $10.785 billion, largely due to Centene's acquisition of Health Net in March.
But Centene had to set a $300 million premium deficiency reserve, mostly due to Health Net's losses in the California and Arizona exchanges. Many other insurers, including UnitedHealth (UNH) and Humana, have also set some reserves.
Centene says its overall performance in Affordable Care Act exchanges is strong.
Centene shares fell 8.5% to 68.87 in the stock market today, plunging below a 71.63 entry point in a cup-with-handle base. But the stock closed above its 50-day line after tumbling as low as 63.44 intraday.
IBD'S TAKE: Centene has been the leader in the Medical-Managed Care group, but other health insurer stocks are performing well. To compare Centene's vitals vs. objective criteria and its peers, go to IBD Stock Checkup.
UnitedHealth and Humana have announced plans to exit most ObamaCare exchange markets, but Centene has been expanding its reach, pushing up deductibles to woo customers with lower premiums. The insurer has benefited strongly from the law's Medicaid expansion.
Meanwhile, the Justice Department last week sued to halt the Aetna-Humana and Anthem-Cigna combinations. Centene and others were reportedly attempting to buy some of the Medicare Advantage plans Aetna might have to sell to help green-light its purchase of Humana.
But Centene CEO Michael Neidorff on Tuesday said that the insurer "has not participated and will not participate in bidding and auctions. So anything that indicates that would have to be considered a rumor."
Aetna fell 0.5% and Anthem 1.7%. Cigna lost 0.1% while Humana rose 0.55%. UnitedHealth edged down 3 cents at 141.70.
