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Shares of Centene (NYSE:CNC) fell in early Friday trading after news that the company has been awarded contracts to continue serving members in nine counties across California but has not been awarded contracts in Los Angeles, Sacramento, and Kern.
The Medi-Cal Managed Care contracts are awarded by the California Department of Health Care Services. They gave Molina Healthcare (NYSE:MOH) coverage in Los Angeles.
Following the news, Centene released a statement saying it is disappointed not to have been awarded contracts in the areas mentioned.
“Through our local health plan, Health Net of California, we have been providing quality, comprehensive and equitable healthcare to members throughout California for 25 years. We have a deep history in serving these communities and members who have come to rely on our services and care,” stated Centene.
“We strongly believe our exit in these counties will be a significant disruption in services to our members and providers. We are evaluating all options to appeal the decision and protect our members and their access to quality healthcare,” they added.
A Wells Fargo analyst downgraded Centene shares from Overweight to Equal-Weight, lowering the price target to $99 from $103, following the announcement.
“Beyond the structural headwinds that were already known and generally understood, the awards represent pretty close to a worst-case outcome for CNC with the crown jewel of the CA Medicaid program (Los Angeles county) set to transition from CNC to MOH,” the analyst wrote.
“Conversely, for MOH the awards represent a best-case outcome and are actually more meaningful for MOH than CNC given the significant difference in revenue (2022 guidance of ~$30B for MOH and ~$142B for CNC),” he added.
While Centene shares fell more than 5% in early Friday trading, Molina Healthcare climbed over 5%.
