Bull of the Day: Centene (CNC)

Centene Corporation, a Zacks Rank #1 (Strong Buy), has staged one of the more impressive turnarounds in the healthcare space over the past year.After a difficult 2025 that saw the stock fall out of favor amid elevated medical costs, the managed care giant has come roaring back, supported by recovering margins, surging cash flow, and a powerful wave of upward earnings estimate revisions. The company is a leading provider of government-sponsored healthcare, with a dominant position in Medicaid and a rapidly expanding Medicare footprint.The stock has rebounded sharply off its 2025 lows and now trades near its 52-week high on increasing volume. Shares continue to display relative strength as buying pressure accumulates in this resurgent market leader.Centene is part of the Zacks Medical – HMOs industry group, which currently ranks in the top 10% out of approximately 250 Zacks Ranked Industries. Because it is ranked in the top half of all Zacks Ranked Industries, we expect this group to outperform over the next 3 to 6 months, just as it has begun to in recent months:Image Source: Zacks Investment ResearchTake note of the favorable characteristics for this group below. The industry’s improving positioning has been driven by a positive earnings outlook for its constituent companies in aggregate, along with relative undervaluation — a powerful combination that should lead to higher prices in the future.Image Source: Zacks Investment ResearchHistorical research studies suggest that approximately half of a stock’s price appreciation is due to its industry grouping. In fact, the top 50% of Zacks Ranked Industries outperforms the bottom 50% by a factor of more than 2 to 1.It’s no secret that investing in stocks that are part of leading industry groups can give us a leg up relative to the market. By focusing on leading stocks within the top 50% of Zacks Ranked Industries, we can dramatically improve our stock-picking success.Company DescriptionCentene operates as a diversified, multi-national healthcare enterprise that primarily serves under-insured and uninsured individuals through government-sponsored programs. The company operates through four segments — Medicaid, Medicare, Commercial, and Other — and ranks among the largest healthcare companies in the country, with approximately $191 billion in total projected revenues and a spot at No. 19 on the Fortune 500. It is also engaged in providing education and outreach programs that help members access quality, appropriate care.After navigating a challenging 2025 marked by rising medical costs and a withdrawal of guidance that battered the stock, Centene has executed a methodical recovery. Management’s relentless focus on Medicaid margin restoration, disciplined cost management, and rate adequacy is clearly bearing fruit, while the Medicare Advantage and prescription drug plan businesses have outperformed internal expectations.The Texas Medicaid expansion has added a meaningful new growth vector, and the company has used its robust cash generation — $4.4 billion of operating cash flow in the most recent quarter — to fortify the balance sheet, reducing total debt by $1 billion in the first quarter alone. The consolidated health benefits ratio has been steadily improving, a key signal that the worst of the medical-cost pressure may be in the rearview mirror.Earnings Trends and Future EstimatesWhat stands out is Centene’s renewed ability to deliver eye-catching earnings surprises. The company most recently reported first-quarter 2026 results that blew past expectations, posting adjusted EPS of $3.37 — a figure that surpassed the Zacks Consensus Estimate by a remarkable 80.2% and climbed 16.2% from the year-ago period.Revenues of $49.9 billion rose 7.1% year over year and topped the consensus mark by 5.2%. The company has now topped consensus revenue estimates in each of the past four quarters and exceeded EPS expectations in three of the last four. This track record aligns perfectly with the power of the Zacks Rank system, which prioritizes stocks showing upward earnings revisions.On the heels of that beat, management raised its full-year 2026 adjusted EPS guidance to greater than $3.40, up from a prior floor of greater than $3.00, and lifted its total revenue outlook to a band of $187.5–$191.5 billion.Analysts have responded enthusiastically: the Zacks Consensus Estimate for the current year has surged 15.28% over the past 60 days. That consensus now stands at $3.47 per share, reflecting an enormous 66.8% increase relative to the prior-year figure. Notably, the stock screens as deeply undervalued even after its rally, carrying a PEG ratio of just 0.51 versus the industry’s 1.12 and a top Zacks Growth Style Score of A.Image Source: Zacks Investment ResearchLet’s Get TechnicalCentene CNC has transitioned from a falling knife in 2025 into one of the better recovery stories in the market today. After bottoming last year near $25, shares have more than doubled and now trade near their 52-week high. This is exactly the kind of stock we want to include in our portfolio — one that is trending well and receiving positive earnings estimate revisions.Image Source: StockChartsNotice how shares now reside above upward-sloping 50-day (blue line) and 200-day (red line) moving averages, a hallmark of a healthy uptrend. The momentum has clearly built throughout 2026. With both improving fundamentals and a constructive technical picture, Centene appears poised to continue its outperformance.Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. As we know, Centene has recently witnessed sharp upward revisions. As long as this trend remains intact (and CNC continues to deliver earnings beats), the stock will likely continue its bullish run.Bottom LineBacked by a leading industry group and a renewed history of earnings beats, it’s not difficult to see why this turnaround story is a compelling investment. Currently, CNC carries a Zacks Rank #1 (Strong Buy), driven by powerful estimate momentum.The combination of Medicaid margin recovery, Medicare outperformance, improving cash flow, and a discounted valuation should continue to provide a tailwind for the stock price. With the next earnings report expected in late July, robust fundamentals combined with a strengthening technical trend certainly justify adding shares to the mix. If you haven’t already done so, be sure to put CNC on your watchlist.Zacks' Research Chief Names "Stock Most Likely to Double"Our team of experts has just released the 5 stocks with the greatest probability of gaining +100% or more in the coming months. Of those 5, Director of Research Sheraz Mian highlights the one stock set to climb highest.This top pick is a little-known satellite-based communications firm. Space is projected to become a trillion dollar industry, and this company's customer base is growing fast. Analysts have forecasted a major revenue breakout in 2025. Of course, all our elite picks aren't winners but this one could far surpass earlier Zacks' Stocks Set to Double like Hims & Hers Health, which shot up +209%.Free: See Our Top Stock And 4 Runners UpThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks