Centene Corporation

CNC Details

Centene Corporation (NYSE: CNC) is a multi-national healthcare company that participates in government-sponsored and commercial healthcare programs to cater to under-insured and uninsured individuals. Its revenue-generating segments include 1) Managed Care segment, focused on providing health plans, including all of the functions required to operate them, and 2) Specialty Services segment, comprising supplementary healthcare products and services. As of November 15, 2021, CNC’s market capitalization stood at USD 43.82 billion.

Latest News:

• Partial Stake Sale in USMM: On November 03, 2021, CNC entered into an agreement with Rubicon Founders, Valtruis, Oak HC/FT, and HLM Venture Partners, to divest its majority interest in US Medical Management, LLC (USMM). CNC will hold a minority stake in USMM post deal completion and use the proceeds from the sale for stock repurchases.
• Partnership with Charlotte FC: On October 20, 2021, the company signed a multi-year contract making it the Official Health Insurance partner for Charlotte Football Club. Under this agreement, CNC will also aid Charlotte FC's community program initiatives (comprising Greater Goals, Meals on the Move, and Pitches for Progress)

Q3FY21 Results:

• Growth in Revenue: The company reported an 11.40% rise in total revenues to USD 32.41 billion in Q3FY21 (ended September 30, 2021) compared to USD 29.09 billion in Q3FY20, primarily due to higher Medicaid and Medicare memberships and recent corporate acquisitions.
• Improvement in Net Income: Net earnings (attributable to common shareholders) increased to USD 584 million in Q3FY21 from USD 568 million reported in Q3FY20.
• Decent Balance Sheet: CNC exited the quarter with a cash balance of USD 13.42 billion, with a total debt of USD 18.84 billion.

Key Risks:

• Geographic Concentration: CNC generates a significant chunk of its revenue from providing services in a small number of states. Hence, any drastic changes in these states' economic, competitive, or regulatory environment could harm its financial performance.

Outlook:

• Revenue & EPS Estimates: In FY21, CNC expects its total revenues to be in the range of USD 125.2 – 126.4 billion, with GAAP and adjusted diluted EPS ranging between USD 1.87 – 1.93 and USD 5.05 – 5.15 (based on 589.0 – 592.0 million diluted shares issued and outstanding).

Valuation Methodology: EV/EBITDA Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

CNC Daily Technical Chart (Source: REFINITIV)

Stock Recommendation:

CNC's stock price has increased by 29.06% in the past nine months and is currently close to the higher end of its 52-week range of USD 57.16 to USD 76.17. The stock is currently trading above its 50 and 200 DMA levels, and its RSI Index is 67.67, indicating an overbought zone. We have valued the stock using the EV/EBITDA-based relative valuation methodology and arrived at a target price of USD 71.06.

Considering the significant uptick in the stock price and other technical indicators, we believe the decent business fundamentals are sufficiently reflected at current trading levels. Hence, we recommend a "Sell" rating on the stock at the closing price of USD 75.10, down 1.00% as of November 15, 2021.

* All forecasted figures and Industry Information have been taken from REFINITIV.

* The reference data in this report has been partly sourced from REFINITIV. 

The St. Joe Company

JOE Details

The St. Joe Company (NYSE: JOE) is a Northwest Florida-based real estate development, asset management, and operating company. The company is focused on increasing the value of its real estate assets by constructing residential, commercial, and hospitality buildings. Nearly 86 percent of JOE's real estate is located in Florida's Bay, Gulf, and Walton Counties. In addition, approximately 90 percent of its property holdings are within 15 miles of the United States Gulf of Mexico. As of November 15, 2021, the company’s market capitalization stood at USD 3.12 billion.

Latest News:

• Development of Newly Planned Community: On August 05, 2021, JOE announced that it had started construction on its new master-planned community spread across 554-acres in Mexico Beach, Florida. The project's first phase will include 42 townhouses, with subsequent phases planned to include additional townhomes, single-family homes, rental apartments, and a walkable commercial village.

Q3FY21 Results:

• Robust Increase in Revenue: The company reported a 28.33% increase in total revenue of USD 53.9 million during Q3FY21 (ended September 30, 2021), compared to USD 42.0 million in Q3FY20, resulting from significant growth in its real estate and hospitality segments.
• Steep Improvement in Net Income: Its Q3FY21 net income was USD 15.2 million, 94.87% higher than USD 7.8 million reported in Q3FY20.
• Cash Dividend: Concurrent with the earnings release, JOE announced a dividend of USD 0.08 per share, payable in cash on December 10, 2021, to shareholders of record on November 12, 2021.
• Leveraged Balance Sheet: The company exited the quarter with a cash balance of USD 27.3 million and a total debt of USD 374.0 million.

Key Risks:

• Geographic Concentration: The company's operations are concentrated in Northwest Florida. Therefore, any significant downturn in economic conditions in this area, such as supply and demand discrepancies, increase in unemployment rates, zonal and other regulatory restrictions that could impact JOE's clients/borrowers' liquidity, could significantly impact the company's financials and cash flows.

JOE Daily Technical Chart (Source: REFINITIV)

Stock Recommendation:

JOE's share price has increased 72.11% in the past twelve months and is currently leaning towards the higher end of its 52-week range of USD 29.84 to USD 57.55. The stock is currently trading above its 50 and 200 DMA levels, and its RSI Index is at 72.04, representing an overbought zone.

Considering the significant uptick in the stock price and other technical indicators, we believe the solid business fundamentals are adequately reflected the current trading levels. Hence, we recommend a "Sell" rating on the stock at the closing price of USD 52.94, down 1.08% as of November 15, 2021.

*All forecasted figures and Industry Information have been taken from REFINITIV.

*The reference data in this report has been partly sourced from REFINITIV.