Centene Corp.

Centene reported Q2 2026 premium and service revenue of $44.4 billion and adjusted diluted EPS of $2.51. Consolidated HBR was 89.6% versus 93% in Q2 2025, and adjusted SG&A expense ratio was 6.9% versus 7.1% last year. Medicaid Q2 HBR was 93.9% with full-year HBR expected around 93.5%; Medicare segment HBR was 89.5%; and Marketplace HBR was 79.2% versus 90.6% last year. The company ended the quarter with $715 million of cash available for general corporate use, repurchased $260 million of senior notes, and had a debt-to-cap ratio of 41.6%. Guidance was raised to greater than $4.80 of adjusted EPS for 2026, with Medicaid HBR around 93.5%, full-year Medicaid rate impact at approximately 5%, full-year Medicaid membership down 8% to 9% versus 12/31/25, PDP pretax margin greater than 3%, and Marketplace pretax margin between 4.5% and 5%. Management also said Q3 adjusted EPS is expected to be a little above breakeven and Q4 a loss due to seasonality.

Sarah London emphasized that the quarter showed progress on both earnings and the company’s longer-term margin-restoration plan. She highlighted stronger-than-expected Marketplace and Medicare results, constructive Medicaid rate developments, and a more disciplined enterprise approach that includes portfolio review, operating-model simplification, and greater use of data and AI. Her tone was confident but measured, repeatedly framing 2026 as a step toward 2027 margin improvement rather than a finished recovery.

Drew Asher focused on the mechanics behind the beat and the revised outlook. He said roughly $0.50 of Q2 earnings came from 2025 settlements that should not recur in 2027, including about $180 million from Marketplace risk adjustment and about $160 million in Medicare-related favorable settlements. He also cited a 6.9% adjusted SG&A ratio, $715 million of cash available for general corporate use, $8 billion of operating cash flow year to date, $3.6 billion of operating cash flow in Q2, and $260 million of senior note repurchases, with debt-to-cap down to 41.6% from 46.5% at year-end.

Analysts focused heavily on Medicaid enrollment, acuity, and how OB3/work requirements might affect the expansion population and 2027 margin recovery. Management said the attrition and slight acuity shift were concentrated in the expansion population and that some of the change may be a pull-forward of OB3-related behavior, but they believe states and Centene can manage it through rate discussions, ex parte processes, and member support. Questions also centered on Marketplace risk adjustment, ACA pricing for 2027, PDP margin expansion, AI-related G&A benefits, and low-utilizer movement in Medicaid; management said the Wakely data confirmed its Marketplace positioning, PDP is now expected to deliver more than 3% pretax margin, and the company is seeing progress on cost management and enterprise optimization.