(Reuters) -Centene shares tumbled more than 25% in premarket trading on Wednesday after the health insurer withdrew its 2025 earnings forecast, citing a sharp decline in expected revenue from its marketplace plans.
The company joins industry bellwether UnitedHealth, which also suspended its annual outlook in May as health insurers struggle with changing enrollment patterns and rising medical costs.
Unlike peers who flagged higher medical costs for Medicaid for low-income people and Medicare for older adults, Centene cited weakness in plans available through the marketplace under the Affordable Care Act, popularly called Obamacare.
Late on Tuesday, Centene said data from 22 of the 29 U.S. states that offer these plans suggested a $1.8 billion drop in the company’s risk adjustment revenue, equivalent to a $2.75 hit to adjusted earnings per share. The states collectively present about 72% of its marketplace membership.
Mizuho analysts raised concerns over an increase in Centene’s medical costs, based on the company signaling that the remaining seven states could have higher prevalence of illness in the general population.
“It is not out of the realm of possibility” that Centene’s earlier 2025 profit forecast of at least $7.25 per share is cut in half, Mizuho said.
Shares of UnitedHealth and Elevance also fell 1.2% and 3.8%, respectively, before the bell.
“This represents a reversal of years of outperformance on its marketplace book of business,” said Oppenheimer analyst Michael Wiederhorn.
However, Wiederhorn added, “the silver lining is Centene caught the trends in time to hopefully limit this to a temporary headwind.”
Centene also reported elevated Medicaid medical costs in states like New York and Florida, particularly in behavioral health, home care and drug spending, and said it expects its second-quarter medical costs to be higher as a result.
Centene’s stock is trading 7.7 times its forward 12-month earnings estimates, compared with a forward price-to-earnings ratio of 16.8 for Humana and 10.62 for Elevance.
(Reporting by Christy Santhosh in Bengaluru; Editing by Leroy Leo)
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