Some of the problems behind Centene Corp.'s decision to cut its 2012 earnings forecast will ease later this summer, but the Medicaid coverage provider will still see reduced earnings in 2013, according to analysts.
The St. Louis company announced on Monday that it had slashed its full-year earnings forecast to account for softer results from its Kentucky health plan, the Hidalgo service area in its Texas health plan and its Celtic individual health business.
Centene now expects 2012 earnings of $1.45 to $1.65 per share, down from a range of $2.64 to $2.84 per share.
That fell well below the average analyst forecast of $2.68 per share, according to FactSet. The insurer's stock plunged 22 percent Monday and hit a 52-week low of $24.26 before rallying to close at $27.58.
The stock closed at $28.20 on Thursday. Its shares traded as high as $50.98 in early April.
Centene met with investors on Thursday, and Susquehanna analyst Chris Rigg said in a Friday morning research note he left that meeting confident that the problems behind the guidance revision "are transient in nature." Even so, he lowered his 2013 earnings estimate for the company to $2.85 per share from $3.10 per share and dropped his price target on the stock to $31 from $40.
Rigg said pressures from Centene's Kentucky and Celtic business could persist into 2013, but the hit to earnings should decline after that.
Citi analyst Carl McDonald called the company's Texas problems "quite fixable," and said that will be driven mainly by a rate increase that starts Sept. 1. Kentucky, however, is different.
"Things can get profitable in Kentucky, but only if the state takes pity on the plans and substantially increases its Medicaid managed care expenditure," McDonald wrote in a separate note.
Medicaid is the state and federally funded program that provides coverage for the needy and disabled.
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