Key Takeaways Centene's HBR rose 550 basis points in Q2 2025 on higher medical costs and premium reserve impacts.Rising outpatient use, specialty drug expenses, and Medicaid redeterminations strain Centenes earnings.Centene is tightening cost controls, boosting value-based care, and divesting assets to support efficiency.Centene Corporation (CNC) relies on its Health Benefit Ratio (HBR) as a measure of profitability. Because Medicaid and ACA marketplace plans generate thinner margins than commercial insuran ...

Group 1: Market Overview - Changing market themes and sector rotations have left some formerly dominant companies trailing the broader rally, raising questions about whether these "left behind" stocks represent a buying opportunity [1] - Bespoke Investment Group identified large-cap "left behind" stocks, highlighting that some well-known companies have performed poorly recently [2] Group 2: Company-Specific Insights - UnitedHealth Group, facing cost pressures and regulatory challenges, is currently trading at five-year lows, with a 57.4% decline from its 52-week high of $630.73 to $268.92, but analysts believe its market dominance and revenue potential could lead to a recovery [3][7] - Lululemon Athletica has seen a significant drop due to shifting consumer trends and increased competition, yet it retains strong brand equity and growth prospects, particularly in international and male apparel segments, suggesting a potential entry point for long-term investors [4] - The Trade Desk continues to show strong revenue growth despite challenges in the digital advertising sector, with a 61.6% decline from its 52-week high of $141.53, and analysts argue that the stock may be undervalued, presenting an opportunity for investors willing to overlook recent volatility [5][7] Group 3: Investment Strategy - Analysts suggest that some of the identified "left behind" stocks are likely to recover over the next year, emphasizing the investment strategy of buying low and selling high [6]

Core Insights - Centene Corporation (CNC) has experienced a significant decline in share price, losing 56.8% year to date, underperforming compared to its industry, sector, and the Zacks S&P 500 composite [2][3] - The company reported its first quarterly loss in over a decade in Q2 2025, driven by elevated healthcare utilization and medical cost pressures, with a health benefits ratio (HBR) reaching 93% [3][11] - Centene's operating costs surged by 27.4% year over year in Q2 2025, totaling $49.2 billion, primarily due to rising medical, tax, and administrative expenses [11][13] Company Performance - Centene's stock is currently undervalued, trading at a price-to-earnings multiple of 10.14, lower than the industry average of 11.46 [10] - The company has cut its 2025 earnings per share guidance to $1.75 from over $7.00, reflecting the impact of increased healthcare utilization trends [11][14] - Despite growth in Marketplace membership, revenues were negatively affected by a shortfall in anticipated 2025 risk adjustment transfer payments and high medical utilization rates [15] Market Position - Centene holds a significant market share in government-sponsored healthcare, with operations in Medicaid, Medicare Advantage, ACA Marketplace, and more [18] - The company has expanded its footprint through acquisitions over the past decade, which supports long-term revenue growth [18] - The One Big Beautiful Bill Act (OBBB) is expected to introduce approximately $1 trillion in federal Medicaid cuts over the next decade, impacting Centene's operations [22] Financial Metrics - Centene's return on equity (ROE) for the trailing 12 months was 9.7%, underperforming the industry average of 21.1% [23] - The return on invested capital (ROIC) was 6.7%, also lower than the industry average of 9% [24] - Long-term debt stood at $17.6 billion as of June 30, 2025, exceeding cash and cash equivalents of $14.5 billion [17] Analyst Sentiment - The Zacks Consensus Estimate for 2025 earnings indicates a 70% year-over-year decrease, while the estimate for 2026 suggests a 51% increase [25] - Recent consensus estimates for 2025 and 2026 earnings have decreased by 48.3% and 36.2%, respectively, in the past week [25]

Financial Performance - UnitedHealth's Q2 earnings missed expectations at $408 per share [2] - Revenues were slightly ahead of expectations [2] - 2025 earnings forecast is at least $16 per share [3] - Street expectations for 2025 earnings were at least $18 per share [4] Guidance and Outlook - UnitedHealth suspended guidance in May and brought back Steven Hemsley as CEO [3] - The company is facing higher costs, higher utilization, and headwinds in Medicare Advantage plans [4] - Optum Health's Q2 revenues were down 7%, and projected to be down 4% for the full year [4] Market Impact - UnitedHealth's 52-week high is $630 [1][6] - The stock is down approximately 45% year-to-date [6] - UnitedHealth is the biggest drag on the Dow Jones Industrials [7] Challenges - V28 reshuffling of Medicare billing is hurting Optum Health's doctor unit [5]

Financial Performance - UnitedHealth's latest quarter profit was smaller [1] - A metric favored by Wall Street came in below estimates [1]

Financial Performance - Centene Corporation reported total revenues of $48.742 billion for Q2 2025, an increase of 22% from $39.836 billion in Q2 2024 [1] - Premium and service revenues rose 18% to $42.467 billion compared to $35.973 billion in the same period last year [6] - The company experienced a diluted loss per share of $(0.51) for Q2 2025, compared to earnings of $2.16 per share in Q2 2024 [18][29] - Adjusted diluted loss per share was $(0.16) for Q2 2025, down from $2.42 in Q2 2024 [18] Membership Trends - Total at-risk membership as of June 30, 2025, was 28,004,900, an increase from 25,709,600 in 2024 [3] - Traditional Medicaid membership decreased to 11,227,400 from 11,640,900 year-over-year [3] - Marketplace membership increased significantly to 5,862,800 from 4,401,300 in the previous year [3] Cost and Expense Management - The health benefits ratio (HBR) for Q2 2025 was 93.0%, up from 87.6% in Q2 2024, primarily due to increased medical costs [1][12] - Selling, general and administrative (SG&A) expense ratio was 7.1% for Q2 2025, down from 8.0% in Q2 2024, reflecting better expense management [1][12] Cash Flow and Balance Sheet - Cash flow from operations for Q2 2025 was $1.785 billion, driven by improved pharmacy rebate remittance timing [1][12] - As of June 30, 2025, the company had cash, investments, and restricted deposits totaling $37.5 billion, with total debt at $17.6 billion [8][27] Community Engagement and Recognition - Centene has been actively involved in community support, including relief efforts for tornado-affected areas [4] - The company was recognized as one of Newsweek's America's Greatest Workplaces for the third consecutive year [4]

UnitedHealth Group confirmed civil and criminal Justice Department probes and said it was responding to requests from the agency following media reports of probes into its Medicare business https://t.co/3a769kPLzU ...

CNBC contributor Jonathan Kanter joins 'Squawk on the Street' to discuss reactions to the Department of Justice investigation into UnitedHealth's Medicare billing practices. ...

United Health Shares falling at this hour as a company reveals in an 8K that it is under investigation by the DOJ on both civil and criminal charges with regard to its Medicaid practice. The company telling CNBC that it proactively went to speak to the DOJ given all of the reports, many of them coming from the Wall Street Journal about uh the investigation going on. company does point out that it has launched an internal audit to look at its practices in Medicare as well as in its PBM pharmacy benefits unit ...

We also uh got some breaking news right now from United Health. Want to get straight over to Bertha Kums who's got that news. Good morning, >> Andrew.United Health falling at this hour as a company reveals in an 8K that it is under investigation by the DOJ on both civil and criminal charges with regard to its Medicaid practice. the company telling CNBC that it proactively went to speak to the DOJ given all of the reports, many of them coming from the Wall Street Journal about uh the investigation going on. ...