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Last Update: 14-Dec-12 07:46 ET
Centene shares fall 4% following disappointing guidance
Centene (CNC $43.15 -1.82) issued guidance for fiscal year 2012 with EPS of $0.10-0.20, does not appear comparable to $1.50 Capital IQ consensus, but lower than co's prior guidance $0.56-0.66. The company issued guidance for fiscal year 2013 with EPS of $2.60-2.90 versus the $2.82 consensus and revenues of fiscal year 2013 Premium and Service revenues of $9.7-10.0 billion, may not be comparable to $10.17 bln (consolidated) Capital IQ Consensus Estimate. The change in 2012 diluted EPS guidance to $0.10 to $0.20 from $0.56 to $0.66 is due to higher medical costs associated with: 1) an earlier and more intensive flu season in our largest markets; 2) an increase to our previously disclosed premium deficiency reserve for Kentucky; and 3) in Texas, the off-cycle transfer of higher acuity members from another health plan and higher than anticipated utilization in our Hidalgo Star and Medicaid Rural Service Areas business.In regards to the latter, their Texas health plan has been in direct discussions with the State concerning these issues. The company states: "We received a written confirmation acknowledging the issues including the impact 'of the negative effects of one Health Plan's efforts to shift higher acuity membership to its competitors.' The State also confirmed their commitment to rectify the matter as soon as possible. We anticipate any such adjustments will be made in the first quarter of 2013." Additional 2013 guidance assumptions: Consolidated Health Benefits Ratio of ~88.0-89.0%. Consolidated G&A expense ratio in the range of 9.0-9.5%. Effective tax rate, excluding non-controlling interest, of ~40.0-41.0%. Days in claims payable between 39 and 44.
