Centene Corp (NYSE: CNC) raised its 2026 profit forecast on Tuesday, following a first-quarter earnings report that exceeded analyst expectations and demonstrated stronger control over medical expenses. The managed-care company's shares surged more than 6% in early trading, reflecting investor relief after more than two years of margin compression across the sector.
The St. Louis-based health insurer reported first-quarter revenue of $49.94 billion and adjusted diluted earnings per share of $3.37, surpassing consensus estimates. On a GAAP basis, diluted EPS came in at $3.11. The company's health benefits ratio (HBR)—the percentage of premiums spent on medical care—improved to 87.3% from 87.5% a year earlier, and well below the 89.42% analysts had anticipated, according to data from Reuters.
Centene lifted its 2026 adjusted diluted EPS floor to more than $3.40, up from its previous guidance of over $3.00. The company also raised its full-year revenue forecast to a range of $187.5 billion to $191.5 billion, compared with the earlier outlook of $186.5 billion to $190.5 billion.
Chief Executive Sarah M. London attributed the improved outlook to ongoing progress in margin recovery and operational improvements across Centene's core businesses. “We are encouraged by our first-quarter results, which position us to raise our full-year adjusted EPS guidance,” London said. She reiterated confidence in the company's long-term earnings power, citing disciplined cost management and favorable utilization trends.
Results were ahead of expectations in most segments, though some areas fell short. Medicaid premium and service revenue rose 6% year-over-year to $23.6 billion, while Medicare revenue jumped 18% to $10.3 billion, driven by strong performance in both Medicare Advantage and the prescription drug business. However, commercial revenue declined 6% to $9.6 billion, as lower Marketplace membership offset gains in other lines.
Centene credited higher Medicaid reimbursement rates, tighter medical cost controls, and a mild flu season for the improved metrics. The company also highlighted that its Medicare Advantage and Part D businesses outperformed internal expectations during the quarter.
J.P. Morgan analyst John Stansel described the quarter as “a positive start to the year,” though he noted several checkpoints over the next two quarters that could still influence Centene’s 2026 guidance. The company faces greater exposure than many peers to government-backed Medicaid and Affordable Care Act Marketplace plans, where shifts in policy or membership can quickly alter the outlook.
The Marketplace business remains Centene’s primary risk area. The company pointed to higher acuity among Silver-tier Obamacare members, which pushed commercial medical costs slightly above projections for the quarter. Risk adjustment payments, designed to balance costs for insurers with sicker patient pools, could provide some relief, but Centene has not fully incorporated an offset into its updated guidance.
Chief Financial Officer Andrew Asher cautioned analysts against extrapolating first-quarter results forward. He said the company expects a sequential earnings decline in the second quarter, a near break-even performance in the third, and a loss in the fourth—consistent with Centene’s historical seasonal patterns.
Centene also strengthened its balance sheet during the quarter. Operating cash flow reached $4.4 billion, and the company used proceeds from a receivables sale to repurchase $1.0 billion of senior notes maturing in 2027. As of March 31, total debt stood at $16.4 billion.
While the immediate market reaction was positive, analysts remain cautious. Centene still needs additional Marketplace risk adjustment data, and Medicaid cost trends will face their true test as the year enters its more challenging second half. For now, the company has demonstrated that its focus on medical cost management is yielding tangible results.
