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Analyst sees long-term potential in Centene shares


Investors beat Centene up this year with the Medicaid coverage provider repeatedly cutting its outlook for the year. But a Goldman Sachs stys there is long-term growth potential in the stock.

THE OPINION: Analyst Matthew Borsch on Monday lowered his earnings forecast for the St. Louis company for the next three years after it told investors that it was cutting its 2012 forecast again on Friday.

Centene cited higher-than-expected health care use in Texas, problems with coverage in Kentucky and the flu season as reasons for the latest reduction.

Borsch said he thinks Centene could more than double its revenue to $20 billion or higher by 2016 as more states opt to have health insurers manage expensive patient populations covered by both Medicare and Medicaid and as the health care overhaul expands coverage for Medicaid, the state-federal health program for the poor and disabled.

"However, growth remains overshadowed by near-term downside to earnings as a side-effect of (Centene's) aggressive expansion strategy," Borsch wrote.

THE STOCK: Centene Corp. rose nearly 2 percent, or 74 cents, to $41.46 Monday afternoon after falling nearly 10 percent on Friday. The shares are still up about 5 percent so far in 2012.


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