Can Centene's Marketplace Recovery Fuel Stronger Earnings Growth?

Centene Corporation CNC is rebuilding its Marketplace business after a difficult 2025, with better pricing, moderating medical costs and improved underwriting dynamics supporting a sharp improvement in profitability. The recovery is becoming an important contributor to Centene’s broader margin-restoration strategy.

The Marketplace health benefits ratio improved to 79.2% in the second quarter of 2026 from 90.6% a year ago. The improvement reflected better medical cost trends and risk-adjustment dynamics. Centene also benefited from a $180 million favorable 2025 CMS risk-adjustment reconciliation during the quarter.

Importantly, the improvement is not dependent solely on membership expansion. Marketplace membership stood at around 3.5 million at the end of June 2026, down substantially from 5.9 million a year ago. However, the business is now expected to generate a 4.5%-5% pretax margin in 2026, compared with the previous 3% outlook. This suggests that tighter pricing and a more favorable risk profile are helping Centene prioritize profitability over volume.

The key challenge now is sustaining those gains as eligibility reviews could cause further membership attrition in the second half of 2026. Centene’s 6.9% adjusted SG&A expense ratio in the second quarter of 2026, which improved from 7.1% a year ago, and increased use of technology, automation and AI could provide another layer of support. If these trends hold, the Marketplace business could provide a more dependable earnings contribution and support Centene’s overall profit growth over time.

How Are Competitors Faring?

Some of CNC’s major competitors in the healthcare service provider space are UnitedHealth Group Incorporated UNH and Elevance Health, Inc. ELV.

UnitedHealth is taking a more selective approach to its individual exchange business, with pricing and benefit adjustments aimed at better aligning premiums with medical costs. UNH’s medical care ratio improved to 86.7% in the second quarter of 2026 from 89.4% a year ago.

Elevance is also working to improve Individual ACA profitability through tighter pricing and plan repositioning. ELV is also investing in clinical oversight, payment integrity and value-based care to improve cost management and support more consistent margins.

Centene’s Price Performance, Valuation & Estimates

Shares of CNC have surged 56.4% in the year-to-date period compared with the industry’s rise of 20%.

Image Source: Zacks Investment Research

From a valuation standpoint, Centene trades at a forward price-to-earnings ratio of 12.39, below the industry average of 15.83. CNC carries a Value Score of A.

Image Source: Zacks Investment Research

The Zacks Consensus Estimate for Centene’s 2026 earnings is pegged at $4.89 per share, implying 135.1% growth from the year-ago period.

Image Source: Zacks Investment Research

CNC stock currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Research Chief Names "Single Best Pick to Double"

From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.

This company targets millennial and Gen Z audiences, generating nearly $1 billion in revenue last quarter alone. A recent pullback makes now an ideal time to jump aboard. Of course, all our elite picks aren’t winners but this one could far surpass earlier Zacks’ Stocks Set to Double like Nano-X Imaging which shot up +129.6% in little more than 9 months.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research