Centene dropped 40% due to withdrawn guidance and rising costs, leading to serious investor concern
Centene shares plunged around 40% after the company shocked investors by pulling its full-year 2025 guidance and revealing significant financial pressures. Here’s what happened:
🔻 Key Reasons for the Drop
- Guidance Withdrawn: Centene rescinded its 2025 outlook after analyzing data from its ACA marketplace in 22 states. The results showed worse-than-expected enrollment and higher medical costs.
- Earnings Hit: Management now expects earnings to fall short of its previous $7.25 EPS target by $2.75 per share, indicating a potential $1.8 billion impact.
- Rising Costs: The company is facing mounting expenses in Medicaid plans, especially from behavioral health, home care, and specialty drugs. These are increasing the medical loss ratio and eating into profits.
- Market Contagion: Other health insurers, like Molina, Humana, Elevance, and UnitedHealth, also saw declines—though less severe—on fears of broader ACA exchange risk.
🧠 Analyst Takeaways
- Analysts downgraded or lowered price targets across the board. They cited uncertainty about Centene’s ability to manage rising costs and maintain profitability in its ACA and Medicaid business.
- There’s concern that the ACA marketplace risk pool is deteriorating, especially with subsidy programs set to expire at the end of 2025.
- Centene is trying to reprice its 2026 ACA offerings to reflect higher-cost patients, but that raises questions about competitiveness and future growth.
🗓️ What’s Next
- Q2 Earnings Report on July 25 will be the next major catalyst. Investors will be watching for details on revised strategy, cost controls, and updated membership trends.
📌 Bottom Line
This was not a routine earnings warning — it was a fundamental reassessment of Centene’s business model. The 40% selloff reflects serious investor concern over its ACA exposure, margin pressures, and unclear recovery path. The entire sector is now on alert.