CNC – Market expectations are for record-low Uniform ROA, but management is confident about revenue growth, margin expansion, and macro tailwinds

• Centene Corporation (CNC:USA) currently trades below corporate averages relative to UAFRS-based (Uniform) earnings, with a 12.6x Uniform P/E. At these levels, the market is pricing in bearish expectations for the firm, but management is confident about their revenue growth drivers, Medicare Stars margin expansion, and macro tailwinds
• Specifically, management is confident the new business win in Oklahoma will drive revenue growth, that they increased their estimate of the state rate and risk-sharing mechanism revenue impact to $550 million, and that the business will experience macro tailwinds for the rest of 2021. In addition, they are confident the Medicare Stars program provides room for margin expansion, nothing unusual is happening with prior year claims development, and their Marketplace business has not seen a change in acuity levels