CNC - Embedded Expectations Analysis - 2020 10 23
Centene Corporation (CNC:USA) currently trades below corporate averages relative to UAFRS-based (Uniform) earnings, with a 15.7x Uniform P/E. At these levels, the market has bearish expectations for the firm, and management may have concerns about the negotiations regarding state support, their ability to sustain financial performance, and the impact of the pandemicSpecifically, management may lack confidence in their ability to sustain overall financial performance. Management may also have concerns about the short-term pressures of state budget cuts on their rates and negotiations regarding the federal medical assistance percentage (FMAP), and about their actuarial soundness advocacy. Moreover, they may lack confidence in their ability to plan alongside the pandemic and strengthen their business to serve the growing population, and they may be concerned about their new hires' ability to help with provider and members experience
Centene is an insurance holding company. The company's Managed Care segment provides health plan coverage to individuals through government subsidized programs. The company also provides a variety of individual, small group, and large group commercial healthcare products, both to employers and directly to members in the Managed Care segment. The company's Specialty Services segment consists of the company's specialty companies prviding healthcare services and products to state programs, correctional facilities, healthcare organizations, employer groups and other commercial organizations, as well as to its own subsidiaries. The Specialty Service segment also includes the Government Contracts business.
In 2009, just as the dust was settling from the last major equity and credit market crises, we launched a boutique research firm with the intention of breaking Wall Street’s biases and broken incentives:
- GAAP and IFRS have failed to provide rules for reliable financial statement reporting
- Stock analyst recommendations are not grounded in disciplined financial analysis
- Credit agencies have been set up to grossly fail in their responsibilities to investors and the public markets
- Utter lack of willingness of major research firms to employ the the most advanced forensic analysis available
We sought to provide investors and company analysts with a source of information that changed all that.
Many years later, our business model remains because little has changed on Wall Street.
- Corporate credit ratings remain years behind the fundamental underpinnings of company performance
- Stock analysts continue to make recommendations with deeply inherent biases
- Research firms have failed to break down the walls between credit, equity, and macroeconomic research
- The governing accounting bodies have created more leeway for mis-estimates and mis-classifications as financials have become unwieldy and overwhelming
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