Updated version 4 - Centene raises its 2026 earnings forecast, expects continued earnings growth in 2027.

Added stock price information in paragraph 1, analyst commentary in paragraph 6, and detailed information about medical costs throughout the text.

Sneha S K/Padmanabhan Ananthan

Reuters, October 27 - Centene CNC.N raised its annual profit outlook and said it expects earnings in 2027 to surpass this year's figure, boosting the health insurer's share price by 3%.

In recent years, rising medical demand has driven up costs, squeezing profit margins for health insurers and prompting them to raise prices and tighten cost controls.

Centene CEO Sarah London said on the earnings call that the company has made significant progress in managing cost trends and optimizing its cost structure.

The company expects its 2027 earnings per share to increase from its updated baseline of $4.70 and its revised 2026 adjusted earnings per share forecast (over $5.20).

According to data compiled by LSEG, analysts expect 2027 earnings per share of $5.34.

Morningstar analyst Julie Utterback said: "Although there is uncertainty regarding the important Medicaid market next year, investors may recognize this positive trajectory of expected growth."

Due to stricter eligibility rules, the company has faced decreasing Medicaid enrollment, which led to the removal of some beneficiaries from the rolls. This has resulted in a relatively less healthy insured population, requiring more medical care.

Centene said states are adopting more systematic eligibility verification approaches, which should alleviate the enrollment impact throughout 2027 and into early 2028.

Centene reported that its Medicaid plan costs for low-income populations were in line with expectations, in part due to states raising reimbursement rates.

The company also said its "Medicare Advantage" business is expected to break even in 2026, a year earlier than anticipated.

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Costs under control

Centene lowered its full-year medical cost ratio forecast (the percentage of premiums spent on medical care) to 90.4% to 91.1%, from its prior forecast of 90.5% to 91.3%.

Its third-quarter medical cost ratio was 92.7%, unchanged from the previous quarter and better than expected. Analysts had previously forecast this ratio at 92.84%.

The company benefited from improved pricing in its "Obamacare" plans (established under former President Barack Obama's Affordable Care Act), as well as improved performance in its "Medicare Advantage" plans aimed at older Americans.

Centene's adjusted earnings per share in the third quarter was 58 cents, beating analysts' expectations of 10 cents.

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