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Centene · CNC · NYSE

Centene is the largest US government-payer managed care insurer, channeling roughly $176B of Medicaid, Marketplace (Ambetter), and Medicare prescription-drug premiums to providers and keeping a 1-3 cent spread on every dollar.

$41.82
Price
$20.6B
Market cap
$176B
Revenue (TTM)
28M+
Members
IPO 2001 at $14; ran to a split-adjusted ~$99 peak in Aug 2022; crashed 40% in a single day on July 2, 2025; trades at $42 today, ~57% off the all-time high.
2 · The 2025 break

One quarter rewrote the story — and the market is paying the same team to fix it.

  • The 71% miss. CEO Sarah London told the Street on Feb 4, 2025 that 2025 EPS would be 'greater than $7.25.' By July it was reset to $1.75. Final adjusted EPS landed at $2.08 — a 71% cut in six months, on internal pricing causes, not a macro shock.
  • $6.7B goodwill writedown. Q3 2025 wrote off ~38% of carried goodwill — a formal admission that WellCare (2020, $17B) and Magellan (2022, $2.2B) were overpaid for. FY2025 GAAP loss landed at -$13.53 per share.
  • The 40% day. July 2, 2025 — stock fell from $56.65 to $33.78 on a $1.8B Marketplace risk-adjustment hit. Worst single day in company history; spawned the Lunstrum securities class action (S.D.N.Y.) and an alleged SEC investigation.
Management credibility scored 4 out of 10 after the reset. Today's $42 print accepts the same team's next forward number — 'above $3' for 2026 — at face value.
3 · Tomorrow morning

The 2026 bid book is locked in — Q1 earnings on April 28 tells you whether the math works.

  • Pre-market, April 28. Consensus $1.85 adjusted EPS. The first post-rebid Health Benefits Ratio by segment — the cleanest test of whether the recovery is on track or breaking again.
  • The 200 bps ask. Management guided 2026 HBR to 90.9-91.7% versus the Q4 2025 exit of 94.3%. The thesis literally requires Marketplace and PDP medical-loss ratios to drop 200+ bps to validate.
  • The bids are filed. Marketplace repriced in 17 states covering 95% of the book at mid-30s rate increases; 2026 PDP bid submitted below benchmark in 33 of 34 regions; Medicaid composite rate raised from 4% to 5.5% with another 1/1/26 cycle still to come.
The catch: Centene is filing 30%+ rate hikes into a Marketplace pool the company itself models will shrink high-teens to mid-thirties on EAPTC expiration. The fix and the accelerant are the same action.
4 · Money picture

Twenty-year valuation lows on a business that still printed $4.3B of free cash flow in a $6.7B-loss year.

$4.3B
FCF FY2025 21% yield on cap
$5.1B
OCF FY2025 from $0.15B in 2024
0.10×
P/Sales 20-year low
1.03×
P/Book at tangible equity

The goodwill impairment is non-cash; the long-run cash engine has averaged 2.5× net income over a decade and printed positive FCF in 11 of 12 years. The bear's argument is that the 2024-to-2025 OCF swing reflects a one-time Medicaid receivable timing snap-back, not a recurring run-rate. Q1 2026 cash flow will arbitrate.

5 · Who runs this

Reformed board, refreshed C-suite, zero PSU payout — but the activist that installed the CEO is leaving.

  • The Politan exit. Politan Capital — the activist that took a $900M stake in 2021 and forced founder Neidorff out, installing London — cut its CNC position 70.4% in Q4 2025. The most material governance signal of the year, and a vote of no confidence in the team it placed.
  • Mixed insider tape. CEO London bought 19,230 shares at $25.50 (~$490K) in the August 2025 capitulation — a clear conviction signal, 39% below today. Director Burdick (ex-WellCare CEO) sold ~$2.58M over six months. Net across all insiders: 0 open-market buys / 2 sells.
  • Three live legal threads. Lunstrum securities class action active in S.D.N.Y., SEC investigation alleged, House Judiciary subpoena over ACA subsidy fraud. Cumulative state Envolve PBM settlements already exceed $1B and preview the recurring regulatory tax on this business.
The 2023-2025 PSU cycle vested at zero shares — pay-for-performance bit. CEO severance still computes to $35.7M; director-and-officer ownership is 0.37% of the float. Policy alignment, not owner alignment.
6 · For & against

Lean cautious into Q1 — credibility weighs more than the cheap multiple, today.

  • For. $4.3B FCF in a -$13.53 EPS year is unusual; cash conversion has averaged 2.5× net income over a decade; P/Sales 0.10× and P/Book 1.03× are both 20-year lows. CEO bought the bottom; 14.6% of the float retired in three years.
  • For. The 2026 P&L is largely already wired in by filed bid books. Recovery does not require a forecast — it requires the new pricing to hold against actual cost trend, which is now visible quarter by quarter.
  • Against. The same team that defended $7.25 in February and reset to $1.75 by July is now selling 'above $3' for 2026. The current 14× forward P/E IS the bull case — there is no margin of safety on a credibility-4/10 forward number.
  • Against. Mid-30s rate hikes filed into a Marketplace pool the company itself says will shrink high-teens to mid-thirties accelerate the adverse-selection dynamic that broke 2025. The repriced segment lands smaller and sicker.
My view — tomorrow's Q1 Marketplace HBR is the one print that resolves credibility, repricing mechanics, and cash quality at once. Below 87% with member count above 5M, the case for ownership is unambiguous. Until then, the asymmetry favors waiting one day.

Watchlist to re-rate: Watch (1) Q1 2026 Marketplace HBR vs the 87% line, (2) Ambetter member count after EAPTC expiration in the Q2 print, and (3) whether OCF run-rate keeps converging with adjusted net income or collapses back toward the 2024 floor.