Earnings call transcript: Centene Q1 2026 results exceed expectations

Centene Corporation reported robust first-quarter 2026 earnings, surpassing analysts’ expectations with an adjusted earnings per share (EPS) of $3.37, significantly higher than the forecasted $2.13. The company’s revenue also exceeded projections, coming in at $49.94 billion compared to the anticipated $47.58 billion. Following the announcement, Centene’s stock price rose 6.07% in pre-market trading, reflecting investor optimism.

Centene’s strong performance in Q1 2026 reflects its strategic initiatives and market expansion efforts. The company’s results were bolstered by increased premium revenue, particularly due to Medicaid expansion in Texas. This growth aligns with Centene’s trend management initiatives and strategic focus on optimizing its Medicaid and Medicare Advantage segments.

Centene’s Q1 2026 earnings significantly outperformed expectations, with a 58.22% EPS surprise. This marks a notable improvement over previous quarters, demonstrating the company’s effective cost management and strategic growth initiatives.

Following the earnings release, Centene’s stock price increased by 6.07% in pre-market trading, reaching $44.91. The stock has demonstrated strong momentum with an 11% return over the last week and a 31% gain over the past six months. According to InvestingPro analysis, the stock currently trades below its Fair Value, suggesting potential upside for investors. This rise reflects positive investor sentiment and confidence in the company’s revised guidance and strategic direction.

Centene raised its full-year 2026 EPS guidance to greater than $3.40, up from previous estimates of greater than $3.00. The company also increased its premium revenue guidance by $1 billion, largely due to the Texas Medicaid expansion. These revisions underscore Centene’s positive outlook and growth potential.

Centene’s leadership highlighted the success of their trend management programs and the expansion of clinical initiatives. Executives noted, "Our strategic focus on Medicaid and Medicare Advantage has yielded significant results, positioning us well for continued growth."

During the earnings call, analysts inquired about Centene’s strategy for managing rising medical costs and the impact of Medicaid expansion on future earnings. Executives emphasized their commitment to cost management and strategic partnerships with state governments to navigate these challenges.

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Andrew Mok, Analyst, Barclays2: Good day, and welcome to the Centene Corporation 2026 first quarter earnings report. I’d now like to turn the conference over to Jennifer Gilligan, Senior Vice President, Investor Relations. Please go ahead.

Jennifer Gilligan, Senior Vice President, Investor Relations, Centene Corporation: Thank you, Rocco. Good morning, everyone. Thank you for joining us on our first quarter 2026 earnings results conference call. Sarah London, Chief Executive Officer, and Drew Asher, Executive Vice President and Chief Financial Officer of Centene, will host this morning’s call, which also can be accessed through our website at centene.com. Any remarks that Centene may make about future expectations, plans, and prospects constitute forward-looking statements for the purpose of the Safe Harbor provision under the Private Securities Litigation Reform Act of 1995. Specifically, our commentary on our full year 2026 outlook, including the drivers of such outlook, are forward-looking statements.

Actual results may differ materially from those indicated by those forward-looking statements as a result of various important factors, including those discussed in our first quarter 2026 press release and other public SEC filings, which are available on the company’s website under the investor section. Centene anticipates that subsequent events and developments may cause its estimates to change. While the company may elect to update these forward-looking statements at some point in the future, we specifically disclaim any obligation to do so. I will also refer to certain non-GAAP measures. A reconciliation of these measures with the most directly comparable GAAP measures can be found in our first quarter 2026 press release. With that, I would like to turn the call over to our CEO, Sarah London. Sarah?

Andrew Mok, Analyst, Barclays4: Thanks, Jen. Thanks to everyone for joining us. This morning, we reported first quarter adjusted diluted EPS of $3.37, exceeding our previous expectations for the period. The strength of our first quarter performance enables us to increase our full year 2026 adjusted EPS outlook to greater than $3.40, up from our previous expectation of greater than $3.00. We are pleased to be off to a strong start this year as increased visibility and operational improvements are yielding positive momentum and lifting our overall financial performance. Results in the quarter included excellent progress within our Medicaid business as we continue to drive margin improvement through targeted and increasingly scaled initiatives to modernize and standardize processes to better manage medical cost trend. Our Medicare segment results were ahead of expectations without performance from both Medicare Advantage and PDP offerings.

Finally, our commercial segment, the vast majority of which is made up of Marketplace, performed in line with expectations on a pre-tax margin basis as a slightly higher than expected HBR in the period was offset by favorability in segment SG&A. As everyone knows, it is early, so while we are off to a great start, we are taking a prudent outlook for the balance of 2026 as we continue to gain visibility into key factors that will influence the remainder of the year. With that, let’s dig into the results. Medicaid results in the quarter were ahead of our previous projection, outperforming our HBR expectation in the period. Within that, we experienced a flu season that was lighter than our original forecast and saw a slight utilization benefit from weather events.

That said, we were pleased to also deliver solid fundamental outperformance in the quarter, thanks to continued focus and disciplined execution on trend management initiatives across the portfolio. Behavioral health remains the largest driver of trend, with other categories like home health and high cost drugs continuing to be consistent contributors. That said, we are beginning to see pockets of deceleration across this cohort, largely in line with our expectations for how trend would mature from 2025 into 2026. At the same time, we continue to strengthen and scale the multi-pronged trend program we deployed in the back half of 2024 and ramped significantly in the face of elevated trend in 2025.

This includes standardizing best practices on utilization management across our markets, the addition and further expansion of successful clinical programs, ongoing data-driven network optimization to ensure our members have access to the highest performing providers, advocacy around program reform with our state partners, and increasingly aggressive efforts to stamp out fraud, waste, and abuse. We’ve discussed here at some length the work we’ve done around ABA, but with the benefit of more than a year’s worth of data under our belt, we are seeing stabilizing year-over-year ABA trends that we believe are a direct result of the actions we have taken to ensure appropriate high-quality care for ABA members across the country. We continue to strengthen our identification of outlier providers who exhibit suspect or fraudulent billing patterns.

At the same time, we continue to advocate for the ability to more fully address fraud, waste, and abuse in a standardized prevention-focused posture across Medicaid programs. We recently highlighted several potential reforms in response to an RFI from CMS, including allowing proactive payment suspensions, creating safe harbors, and improving two-way data sharing. We look forward to partnering with CMS and the states we serve to better protect tax, taxpayer dollars and strengthen overall program integrity. Looking to the remainder of the year, our guidance assumes net trend, defined as medical costs net of these trends management initiatives, remains in the mid 4% range, and we continue to execute with the goal of outperforming that target. Rates are of course the other major contributor to our margin restoration agenda. We continue to work closely with our state partners to ensure alignment between program revenue and member acuity.

With respect to the full year outlook, we continue to track in line with our expectation for a composite rate yield of roughly 4.5%. Conversations with Medicaid departments remain constructive and we continue to present refreshed data and in many instances, programmatic solutions for challenges our state partners are facing as they look to balance costs and benefits within the Medicaid program. While it is still early, we are pleased with the momentum we are seeing across the Medicaid portfolio, and we continue to see opportunity for advancement in 2026 and beyond. Our Medicare segment also delivered strong results in the quarter. Both Medicare Advantage and PDP exceeded expectations, producing an HBR of 84.9, better than our previous forecast and contributing nicely to the first quarter adjusted EPS beat.

Medicare Advantage, we continue to strategically align our membership with our Medicaid footprint and make great progress on our path to positive earnings. While trend continues to be elevated versus historical baselines, it is so far consistent with what we plan for in our bids, with slight favorability in Q1. Thanks to strong execution during both AEP and OEP, we are seeing a slightly more favorable membership mix, and our D-