Why Centene Shares Got Crushed

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of managed-care provider Centene (NYSE: CNC  ) plummeted 27% on Monday after the company slashed its current-quarter and full-year earnings outlook.

So what: Centene shares fell last week on worries that it would be pressured by the same cost troubles in Texas weighing on rival Molina, and today's announcement naturally confirms those fears. Unfortunately, Centene is also seeing significantly higher costs and claims in Kentucky and its Celtic individual health business, giving investors little hope for a near-term turnaround.

Now what: Management expects to post a loss in the second quarter and now sees full-year EPS of $1.45-$1.65, down substantially from its prior view of $2.64-$2.84. But while the short-term will certainly be turbulent, a few Wall Street analysts remain bullish on Centene's long-term growth potential, given the trend of increased Medicaid spending. With the stock hitting a new 52-week low today -- down roughly 50% from its April highs -- now might be an opportune time to bet on it.

Interested in more info on Centene? Add it to your watchlist.

Fool contributor Brian Pacampara owns no position in any of the companies mentioned. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

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9/29/2016 1:18 PM
CNC $67.77 Down -1.27 -1.84%
Centene CAPS Rating: *****