Centene Corporation (CNC) shares plummeted 5.43% in pre-market trading on Tuesday, February 4th, despite reporting solid financial results for the full year 2024. The pre-market plunge can be attributed to higher-than-expected medical costs in the fourth quarter of 2024.

The healthcare company announced its fourth-quarter and full-year 2024 financial results before the market opened. While Centene delivered strong top-line and bottom-line growth for the full year, investors were spooked by an elevated health benefits ratio (HBR) in the fourth quarter.

For the fourth quarter of 2024, Centene reported a HBR of 89.6%, representing an increase from 89.5% in the comparable period of 2023. The increase was primarily driven by higher medical costs in the Medicaid business, as the company continued to work with states to match rates with acuity levels following the redetermination process.

Despite the higher-than-expected medical costs in Q4, Centene reported solid financial results for the full year 2024:

• Premium and service revenues increased 4% to $145.5 billion, driven by membership growth in the Marketplace business and Medicaid rate increases.
• Adjusted diluted EPS of $7.17, up 7% from the previous year and exceeding the company's guidance.
• Executed on capital deployment with $3.0 billion in share repurchases.

Looking ahead to 2025, Centene raised its premium and service revenues guidance range by $4.0 billion to $158.0 billion to $160.0 billion, reflecting outperformance in Medicare Advantage and Prescription Drug Plan (PDP) annual enrollment, as well as a program change adding behavioral health coverage in a state Medicaid contract.

While the market reacted negatively to the elevated Q4 health costs, Centene reiterated its 2025 GAAP diluted EPS guidance floor of greater than $6.19 and its adjusted diluted EPS guidance floor of greater than $7.25, indicating confidence in its ability to manage medical costs and deliver profitable growth in the coming year.