Centene beat Wall Street's Q3 earnings expectations. Management raised guidance. Everybody celebrate! 🎉
Except there's some interesting math buried in those results.
• ~61,000~ 53,900 employees. Down 7,000 in a year.
• 2.3 MILLION fewer managed-care members.
• GAAP administrative expenses actually INCREASED.
• $480 MILLION in expected restructuring costs excluded from adjusted earnings.
• GAAP EPS: −$0.14. Adjusted EPS: +$0.58.
During the earnings call, Barclays analyst Andrew Mok asked a pretty reasonable question:
- What are the annualized savings from that $480 million restructuring?*
Management couldn't quantify them. Just promises of improvement in 2027. Meanwhile, Sarah London talked about AI, automation, and investments in the company's data and context layer.
Oh, excellent! So where's the ROI?
What actually got more efficient? How much work shifted to vendors? What happened to service quality? And how much of the improving expense ratio comes from actual productivity versus simply having fewer members?
Because Centene acknowledged that changing business mix contributed to the improvement. That's not necessarily transformation. That's math.
You can eliminate thousands of jobs, shrink the business, outsource operations, and call it AI-enabled efficiency. But until you demonstrate better outcomes at a sustainably lower total cost, you've demonstrated cost cutting. Not transformation.
And if you eliminated the people who actually understood how the business worked? Don't worry. I'm sure the consultants can figure it out. 😂 Maybe they can even explain why the analysts didn't ask for the actual ROI before celebrating it.
And here's another question Wall Street should've asked:
- After the last 10–12 earnings calls, why should investors continue taking Drew Asher's forward-looking assurances at face value without demanding a scorecard of what was promised versus what actually happened?* Isn’t he on the way out?? I guess the company gets a pass if the future stack prices are good for inverstors? Yeah, let’s go with that.
The reality??? Go back in time and show us the original projections, the revisions, the actual results, and the explanations for the misses. Quarter by quarter. Because eventually, "trust us, next year will be better" stops being guidance and starts being a question about accountability. 🤔 Seriously though… go back and look at them. I did before writing this.