HSA Trends - Older workers typically hold the largest HSA balances [1] - Older workers contribute and withdraw more from HSAs [1] - Medical costs typically grow with age, impacting HSA activity [1]

Core Insights - Centene Corporation is facing significant challenges due to elevated utilization rates and rising medical costs, similar to pressures affecting the broader healthcare industry [1][4] - Membership losses in Medicaid and Medicare Advantage are eroding Centene's base, leading to a decline in stock price and valuation below industry averages [2][4] Valuation and Performance - Centene's forward P/E ratio is 13.25X, lower than the industry average of 16.16X but above its five-year median of 11.24X [3][6] - The stock has decreased by 43.2% year-to-date, underperforming compared to industry peers and the S&P 500 [4] Financial Metrics - Operating expenses increased by 5.5% in 2023, 5.8% in 2024, and surged by 21.1% in the first half of 2025, driven by rising medical costs [7] - The health benefits ratio (HBR) rose from 87.7% in 2023 to 93% in Q2 2025, indicating reduced profitability [7][8] - Adjusted net margin fell from 2.3% to negative 0.2%, with 2025 EPS guidance revised down to $1.75 from $7.25 [8] Debt and Returns - Centene's long-term debt is $17.6 billion, reflecting a debt-heavy balance sheet due to acquisitions [9] - The trailing 12-month return on invested capital is 6.7%, below the industry average of 9% [9] Market Outlook - The Zacks Consensus Estimate for 2025 earnings is $1.64 per share, a 77.1% decrease year-over-year, with eight downward revisions in the past 60 days [11] - Revenue is expected to grow by 16.9% in 2025, despite the challenges [11] Strengths and Opportunities - Centene's commercial business is expanding, with marketplace memberships increasing by 33.2% in Q2 2025 [15] - Medicare quality scores are stable, with a larger portion of members in four-star plans, which qualify for bonus payments [16] Conclusion - Centene's lower valuation may seem attractive, but underlying issues such as rising medical costs, declining memberships, and heavy debt present significant challenges [17] - While there are some positive indicators, they are insufficient to counterbalance the operational and financial headwinds in the near term [17]

Core Insights - Centene Corporation (CNC) reported a second-quarter 2025 adjusted loss per share of 16 cents, missing the Zacks Consensus Estimate of earnings of 68 cents, and a significant decline from the year-ago profit of $2.42 per share [1][11] Financial Performance - The company's revenues increased by 22.4% year over year to $48.7 billion, surpassing the consensus mark by 10.9% [2][11] - Medicaid revenues grew 7% year over year to $21.7 billion, while Medicare revenues surged 58% year over year to $9.5 billion [3] - Commercial revenues improved 18% year over year to $10.1 billion [3] - Total premiums reached $41.7 billion, an 18.8% year-over-year increase, driven by higher premiums and an expanding membership base [4] Membership and Operational Metrics - Total membership (excluding TRICARE) was 28 million as of June 30, 2025, reflecting an 8.9% year-over-year growth, although there were declines in Medicaid and Medicare memberships [6] - The health benefits ratio deteriorated to 93%, a 540 basis point decline year over year, exceeding the consensus mark of 90.82% [7] Expenses and Losses - Operating expenses totaled $49.2 billion, a 27.4% year-over-year increase, attributed to rising medical costs, premium tax expenses, and administrative costs [7] - Adjusted net loss was recorded at $79 million, contrasting with year-ago earnings of $1.3 billion [8] Cash and Equity Position - As of June 30, 2025, Centene had cash and cash equivalents of $14.5 billion, up from $14.1 billion at the end of 2024 [9] - Total assets increased to $86.4 billion from $82.4 billion at the end of 2024, while long-term debt decreased to $17.6 billion from $18.4 billion [9] Share Repurchase Activity - Centene repurchased common shares worth approximately $432 million in the second quarter of 2025 [12] Peer Comparison - Elevance Health, Inc. reported second-quarter 2025 adjusted EPS of $8.84, missing estimates and showing a 12.6% year-over-year decline [13] - UnitedHealth Group is expected to report a significant year-over-year decline in profits despite a projected 12.8% revenue increase [14]

Financial Performance - Elevance Health cut its profit outlook for the year [1] Healthcare Industry Dynamics - Higher medical costs in Affordable Care Act plans impacted Elevance Health [1] - Lower reimbursement from Medicaid impacted Elevance Health [1]

Core Viewpoint - UnitedHealth Group Inc. reported mixed first-quarter 2025 results, with adjusted EPS of $7.20 falling short of estimates, while revenues increased year over year but missed consensus expectations due to lower premiums [1][2]. Financial Performance - Adjusted EPS for Q1 2025 was $7.20, missing the Zacks Consensus Estimate of $7.27, but reflecting a 4.2% year-over-year increase [1]. - Revenues rose 9.8% year over year to $109.58 billion, but missed the consensus mark by 1.4% [1]. - Medical care ratio (MCR) was 84.8%, worsening from 84.3% a year ago and below the consensus estimate of 85.9% [4]. - Total operating costs increased 9.4% year over year to $100.5 billion, exceeding model estimates [5]. - Operating earnings grew 15% year over year to $9.1 billion, with net margin improving from negative 1.4% to 5.7% [6]. Business Segment Performance - UnitedHealthcare revenues increased 12.3% year over year to $84.6 billion, driven by domestic commercial membership growth, surpassing estimates [7]. - Optum revenues were $63.9 billion, up 4.6% year over year, but fell short of the consensus mark [8]. - UnitedHealthcare served 50.1 million members, a 1.9% year-over-year growth, but below the consensus estimate of 50.6 million [9]. Financial Position - Cash and short-term investments rose to $34.3 billion from $29.1 billion at the end of 2024 [10]. - Total assets increased to $309.8 billion from $298.3 billion at the end of 2024 [11]. - Long-term debt decreased to $71.29 billion from $72.36 billion [11]. - Operating cash flows surged to $5.5 billion from $1.1 billion year over year [12]. Capital Deployment - UnitedHealth returned over $5 billion to shareholders through share repurchases and dividends in Q1 2025 [13]. 2025 Outlook - Management revised adjusted net EPS guidance to between $26 and $26.50, down from previous estimates [14]. - Projected net earnings for 2025 are expected to be between $22.5 billion and $23.1 billion, an increase from 2024 [14]. - Revenue estimates for 2025 are between $450 billion and $455 billion, up from $400.3 billion in 2024 [14].