Centene's Earnings Surge Amid Healthcare Challenges: 2026 Outlook
Centene's Financial Performance and Outlook Review
In the latest quarterly update, Centene Corporation showcased notable performance, presenting an optimistic earnings forecast for 2026. This stands out in a challenging period for many managed care organizations. In the fourth quarter, Centene exceeded Wall Street's expectations, achieving higher earnings and revenue, even in a tough landscape for insurers primarily involved in government-sponsored programs.
Centene projected adjusted diluted earnings per share of at least $3 for 2026, an increase from the $2.08 projected for 2025, surpassing analysts' predictions. However, a revenue projection with a midpoint of $188.5 billion for 2026 reflects a decline from analyst estimates and last year's $194.8 billion revenue. This decrease is mainly due to shrinking premium income from its Affordable Care Act (ACA) business, as rising costs and the departure of enrollees impact the exchanges.
Despite these challenges, Centene remains optimistic about stabilizing elevated medical costs this year. The broader managed care sector faces hurdles, with companies like Elevance and Molina predicting reduced profitability in 2026, particularly in Medicaid and ACA segments. Issues include Medicaid payment rates not aligning with rising care costs and increased care acuity in ACA plans, leading to market exits or shifts to less comprehensive coverage options.
As a major player in Medicaid managed care and the leading ACA exchange provider, Centene holds significant market influence. Company executives are confident in managing medical expenditures effectively. CEO Sarah London emphasized the disciplined execution that allowed Centene to exceed expectations in a challenging 2025, during a recent investor call.
Centene's fourth-quarter report documented a 22% year-over-year revenue increase, reaching $49.7 billion. Despite this, the company faced a net loss of $1.1 billion due to increased medical spending, a shift from the previous year's $283 million gain. Additionally, a medical loss ratio (MLR) of 94.3% rose from 89.6% the prior year, driven by unexpected illness rates in ACA members and billing dispute expenses linked to the No Surprises Act.
The Medicare Advantage segment also faced higher spending pressures. However, Centene's foundational Medicaid business remained profitable, balancing rate increases with high medical costs. The 2026 outlook assumes steady Medicaid margins, a relatively positive view in a sector facing continued margin compression.
In contrast to Molina's lower earnings projections for 2026, analysts have welcomed Centene’s fourth-quarter results. Centene plans to end the first quarter with 3.5 million ACA enrollees, down from 5.5 million in 2025, due to premium adjustments. An increase in bronze plan enrollment among ACA members has stabilized, passing the 30% mark of Centene's ACA membership.
Lastly, Centene aims for break-even margins in its Medicare Advantage segment and addresses upcoming rate updates from the Centers for Medicare & Medicaid Services for 2027. The company is also finalizing agreements to divest its remaining Magellan Health management divisions. Centene's strategic adjustments and robust performance metrics indicate a well-managed approach amid industry headwinds, offering valuable insights into navigating the complex landscape of healthcare insurance.