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Centene cuts FY'19 EPS projection

Centene Corp. reported third-quarter net earnings attributable to the company of $95 million, or 23 cents per share, up from $19 million, or 5 cents per share, in the prior-year period.

Adjusted EPS was 96 cents, compared to 89 cents for the third quarter of 2018. The company also cut its GAAP EPS projection for 2019 to between $3.04 and $3.21 from $3.70 to $3.87 previously.

The S&P Global Market Intelligence consensus GAAP EPS estimate for the quarter was 81 cents, and S&P Global Market Intelligence consensus GAAP EPS estimate for 2019 is $3.50.

Total revenues climbed year over year to $18.98 billion from $16.18 billion. The increase over the prior year was primarily due to growth in the health insurance marketplace business; expansions and new programs in many of the company's states in 2018 and 2019, particularly Arkansas, Illinois, Iowa, New Mexico and Pennsylvania; and its recent acquisitions in Spain. These increases were partially offset by the health insurer fee moratorium in 2019.

Centene's managed care membership rose to 15.3 million as of Sept. 30 from 15.0 million at June 30 and 14.4 million on Sept. 30, 2018.

The company during the third quarter recorded $271 million, or 57 cents per share, of noncash goodwill and intangible asset impairment. Substantially all of the impairment related to Centene's U.S. medical management business and was identified as part of its quarterly review procedures, which included analysis of new information related to shared savings demonstration programs, slower-than-expected penetration of the physician home health business model into the company's Medicaid population, and the related impact to revised forecasts.

"The business continues to generate positive cash flows and plays an important role in care management; however, it has fallen short of our overall performance expectations," Centene said.

The board of directors approved a $500 million increase to the company's stock repurchase program. Under the increased stock repurchase program, the company said it will be in a position to repurchase shares or pay down debt with the proceeds from divestitures related to the WellCare Health Plans Inc. acquisition.

Also, the New York Department of Financial Services and Department of Health each approved Centene's pending indirect acquisition of New York-domiciled WellCare insurance subsidiaries, bringing the total number of states to approve the transaction to 25.

The transaction is expected to be completed by the first half of 2020. Completion remains subject to clearance under the Hart-Scott-Rodino Act, receipt of the remaining required state regulatory approvals and other customary closing conditions.