December 14, 2012
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 Centene (NYSE: CNC ) sank 10% today, after the health insurer cut its 2012 profit estimate and issued disappointing 2013 guidance.
So what: Centene shares have soared in recent months on a couple of better-than-expected quarters, but the 2012 estimate slash -- management now sees 2012 EPS of $0.10-$20 versus its prior view of $0.56-$0.66 -- coupled with downbeat guidance for 2013, rekindles concerns over the troubles facing the company. Specifically, management blamed higher costs related to an intense flu season and continued premium deficiencies in its Kentucky and Texas Medicaid contracts for the shortfall, forcing analysts to lower their valuation estimates.
Now what: Management now expects 2013 EPS of $2.60-$2.90 per share on premium and service revenue of $9.7 billion-$10.0 billion, versus the consensus estimate of $2.85 and $10.35 billion. Of course, the good news is that Centene did receive written confirmation from the State of Texas acknowledging its cost issues, and expects the State to rectify them fairly quickly. So, for investors who've been waiting for an opportunity to buy into Centene, today's pullback seems like a good one.
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