April 23, 2019 / 10:33 AM / 3 months ago

UPDATE 3-Centene Corp raises 2019 forecast, pushes forward on WellCare deal

(Adds details from conference call, analyst comments; updates share price)

By Tamara Mathias

April 23 (Reuters) - Centene Corp on Tuesday raised its earnings and sales forecast for the year and said it had begun early discussions with regulatory authorities regarding its planned acquisition of smaller rival WellCare Health Plans .

On a conference call with analysts, Centene said that it might have to make some divestitures in Nebraska and Missouri in order for the proposed $15.27 billion deal to go through.

The company, which expects to close the deal in the first half of next year, hopes the acquisition will help bulk up its government-backed Medicare and Medicaid businesses.

Chief Executive Officer Michael Neidorff said that he expects 2020 to be an "inflection point" for the company's Medicare Advantage business, which caters to people aged 65 or older.

"I took their comments to indicate that they expected Medicare Advantage to be better next year... whether the WellCare deal closes or not," Jefferies analyst David Windley said.

"But clearly closing the Wellcare deal would significantly enhance even their organic growth potential."

On Tuesday, Centene raised its 2019 revenue forecast to between $72.8 billion and $73.6 billion from a prior range of $70.30 billion to $71.10 billion.

The company said it expected an additional $1 billion in payments and $700 million from its Obamacare business, where it is retaining more members than previously expected.

Shares rose 2 percent to $49.01 in volatile trading.

"In terms of the fundamentals - those remain very much on a solid footing," Stephens analyst Scott Fidel told Reuters.

"It is particularly noteworthy that this is a company that raised their 2019 revenue guidance by $2.5 billion today. That's just not the sort of boost to annual guidance that you tend to see."

As the future of U.S. healthcare policy remains unclear, investors have dumped shares of companies in the sector, especially health insurers, which are widely expected to be hit by the Trump administration's proposed overhaul of the rebate system and Senator Bernie Sanders' "Medicare-for-all" plan.

Analysts say a nervous environment persists around health insurance stocks, leaving them susceptible to volatility despite strong earnings reports.

In the quarter ended March 31, Centene's total revenue rose nearly 40 percent to $18.44 billion, beating analysts' estimates of $17.47 billion. The top line was boosted by the company's acquisition of Fidelis Care last year and program expansions in states like Florida and Illinois.

Centene reported adjusted earnings per share of $1.39. Analysts on average were expecting $1.34, according to IBES data from Refinitiv.

Net earnings attributable to Centene rose 53.5 percent to $522 million, or $1.24 per share. (Reporting by Tamara Mathias in Bengaluru; Editing by Shailesh Kuber)

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