Centene Corporation (CNC) Earnings & Analysis

Latest quarter

Centene reported Q2 FY2026 revenue of $53.6 billion, compared with the consensus of $47.5 billion; revenue, as the consensus counts it, was 12.7% above the consensus. The company reported diluted EPS of $2.19, versus −$0.51 in Q2 FY2025, while Drew Asher said adjusted diluted EPS was $2.51.

The filing says revenue rose 9.92% from Q2 FY2025, driven primarily by premium-tax revenue from state pass-through payments, premium yield and PDP membership growth, Marketplace and Medicaid rate increases, Marketplace risk-adjustment transfers, and state-directed payments. The filing says lower Marketplace and Medicaid membership partly offset those increases.

Centene reported gross margin of 8.59%, from 6.05% a year earlier, and operating margin of 2.24%, from −0.94%. The company reported free cash flow of $3.4 billion, compared with $1.6 billion a year earlier, and net income of $1.1 billion.

Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.

What management said on the call

Sarah London said Medicaid ended the quarter with just over 12 million members, with membership declining somewhat more than Centene had anticipated. She said state-specific program changes and enrollment and eligibility activity contributed to the decline, while behavioral health, home health and high-cost drugs remained key medical-cost drivers. London said July 1 Medicaid rates were better than expected, lifting Centene’s full-year composite-rate forecast to roughly 5% from roughly 4.5%.

Analysts asked about the effect of Medicaid attrition and OB-3-related eligibility activity on acuity and margins. London said Centene had retained the 50-basis-point benefit from improved rates in its outlook to account for additional attrition and acuity effects in the second half. She said the company was working with states on eligibility data, member outreach and rate adjustments, and that its objective remained Medicaid margin recovery through the policy changes.

London said PDP results benefited from prior-period true-ups and lower-than-expected specialty-drug trend in the first half. She said Centene now expected PDP pre-tax margin above 3% in 2026. Asher said Medicare Advantage was nearing break-even for the full year, while London said the company planned to simplify its Medicare Advantage footprint for 2027 and focus benefits increasingly on dual-eligible members.

On Marketplace, London said higher utilization among Silver-tier members moderated from what Centene had assumed after the first quarter. She said June risk-adjustment data supported Centene’s assessment of its relative member acuity, while final 2025 CMS risk-adjustment reconciliation added $180 million in the quarter. Asher said Marketplace membership was 3.5 million at quarter-end and that Centene expected additional attrition as eligibility verification activity increased.

Asher said Centene’s adjusted SG&A ratio was 6.9% and described enterprise optimization involving digitization, technology and AI. He also said the company expected to pay more than $3 billion of Medicaid pass-through payments in Q3.

Guidance

Centene raised its FY2026 adjusted diluted EPS outlook to greater than $4.80 from greater than $3.40, and its GAAP diluted EPS outlook to greater than $3.11. The company increased expected premium and service revenues by $2.0 billion to $173.0 billion–$177.0 billion and total-revenue guidance by $6.0 billion to $193.5 billion–$197.5 billion. Centene raised its expected Marketplace pre-tax margin to 4.5%–5% from 3% and its PDP pre-tax margin to greater than 3% from 2%.