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CNC or UNH: Who Has Better Earnings Growth Prospects?

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EPS guidance

In its fourth-quarter earnings conference call, Centene (CNC) guided for fiscal 2019 GAAP diluted EPS of $3.65–$3.83, higher than the previous projection of $3.62–$3.80, on a split-adjusted basis. The company has also revised upwards its adjusted diluted EPS guidance for fiscal 2019 by $0.04 at the midpoint, from $4.08–$4.28 to $4.11–$4.31 on a split-adjusted basis.

In its fourth-quarter earnings conference call, Centene also highlighted its synergy targets for its acquisition of Fidelis Care, which was completed in July 2018. The company aims to achieve adjusted EPS accretion in the high-single-digit percentages and the low-to-mid-teens percentages in the first full year and second full year after completion of the deal, respectively.

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According to a Centene-WellCare investor presentation, Centene expects to benefit from adjusted EPS accretion in the mid-single-digit percentage in the second full year after completion of the acquisition of WellCare Health Plans (WCG). In fiscal 2018, Centene reported adjusted diluted EPS of $3.54, a YoY rise of 40.76%.

In its fourth-quarter earnings press release, UnitedHealth Group (UNH) reiterated its previous net EPS and adjusted net EPS guidance of $13.70–$14.00 and $14.40–$14.70, respectively, for fiscal 2019. In fiscal 2018, UnitedHealth Group reported adjusted diluted EPS of $12.88, a YoY rise of 27.90%.

Wall Street’s projections

Wall Street analysts have projected Centene’s non-GAAP EPS to be $4.24, $4.83, and $5.51, for fiscal 2019, fiscal 2020, and fiscal 2021, respectively. These projections imply a YoY change of 19.89%, 13.71%, and 14.09%, for fiscal 2019, fiscal 2020, and fiscal 2021, respectively.

On the other hand, Wall Street analysts have projected UnitedHealth Group’s non-GAAP EPS to be $14.65, $16.62, and $18.86, for fiscal 2019, fiscal 2020, and fiscal 2021, respectively. These projections imply YoY change of 13.74%, 13.44%, and 13.49%, for fiscal 2019, fiscal 2020, and fiscal 2021, respectively.

UnitedHealth Group is expected to report higher absolute non-GAAP EPS but a lower CAGR (compound average growth rate) EPS growth from fiscal 2019 to fiscal 2021 as compared to Centene.

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