Managed Care: The 3 most likely scenarios for Q2, Hint: most are bullish

Research evidence excerpt

Managed Care: The 3 most likely scenarios for Q2, Hint: most are bullish

Exhibit 2: Stocks mentioned

Prices and ratings for stocks mentioned in this report

BofA Ticker Bloomberg ticker Company name Price Rating

CNC CNC US Centene Corporation US$ 59.55 C-1-9

ELV ELV US Elevance Health Inc US$ 391.27 B-1-7

HUM HUM US Humana Inc US$ 327.54 C-2-7

UNH UNH US UnitedHealth Grp US$ 377 C-1-7

Source: BofA Global Research

BofA GLOBAL RESEARCH

Price objective basis & risk

Centene Corporation (CNC)

Our $74 price objective is based on a 16.4x multiple on our 2027E EPS estimate, above

the 5 year average (11.5x). We see this as justified due to the acceleration we expect in

EPS growth as Medicaid margins normalize in medium term with states increasing rates

to better reflect recent changes in trend and risk pools. Exchanges could be volatile but

early data is positive and CNC can reprice issues in 2027+ giving us comfort that

earnings power than can be restored in the next few years.

Upside risks to our price objective are trend deceleration, Medicaid enrollment

stabilization, and faster than expected Medicaid rate increases from states.

Downside risks to our price objective are continued negative risk pool shifts, state

Medicaid budgets tightening, further acceleration in enrollment declines, exchange risk

pool degradation.

Elevance Health Inc (ELV)

Our $460 PO is based on 15.7x our 2027E EPS, above the 5YR average of 13.4x,

reflecting the acceleration in EPS growth as Medicaid and Exchanges normalize from

trough margins. We see rates improving from states as rates start to reflect recent

trend/risk pool data.

Risks to the downside are trend is higher than expected, a more competitive pricing

environment, it will take longer for states to catch up on new acuity levels in Medicaid,