SKN | Morgan Stanley Maintains Hold on Centene as 2026 Recovery Comes Into Focus

Key Takeaways:

• Morgan Stanley’s Hold rating reflects balance between near-term execution risk and visible margin recovery.
• Medical cost trends are stabilising, but 2025 volatility still weighs on valuation confidence.
• The market is increasingly focused on whether Centene can convert 2026 guidance into durable earnings power.

Morgan Stanley reaffirmed a Hold rating on Centene Corporation on February 6, assigning a price target of $38, following the company’s release of full-year 2025 results and forward guidance. The decision signals a wait-and-see stance as the healthcare insurer transitions from a difficult earnings reset toward a potential recovery phase.

Why Morgan Stanley Is Staying Neutral

Centene reported a full-year 2025 GAAP diluted loss per share of $13.53, alongside adjusted diluted EPS of $2.08. While the headline loss underscores the scale of prior cost pressures, underlying metrics showed signs of stabilisation. The consolidated health benefits ratio in the fourth quarter came in at 94.3%, with Medicaid improving sequentially and Commercial results reflecting identifiable, non-recurring items rather than structural deterioration.

For Morgan Stanley, this combination supports caution rather than conviction. Cost control is improving, but the firm appears unwilling to underwrite a full re-rating until earnings consistency is demonstrated beyond guidance.

Margins Improving, Confidence Still Rebuilding

Management’s outlook for 2026 was notably more constructive. Centene expects adjusted diluted EPS above $3.00 next year, pointing to renewed earnings growth and margin expansion as medical cost trends normalise and operational initiatives gain traction. This guidance suggests the core earnings engine remains intact, but credibility after a volatile 2025 remains central to investor perception.

Morgan Stanley’s Hold rating reflects this tension: visibility is improving, but proof of execution is still required before assigning a premium multiple.

How Investors Are Framing the Setup

Centene’s exposure to government-sponsored healthcare programs makes it sensitive to utilisation trends, reimbursement dynamics, and regulatory shifts. While Medicaid performance showed incremental progress, investors are likely to focus on whether these gains can offset lingering Commercial pressures and deliver sustainable returns through the cycle.

At current levels, the stock sits in a valuation range that neither compels aggressive accumulation nor signals clear downside, aligning with Morgan Stanley’s neutral stance.

Strategic Perspective

For portfolios with healthcare exposure, Centene now represents a transition story rather than a growth anchor. The key variable is execution through 2026: consistent margin delivery could unlock re-rating potential, while any relapse in cost trends would likely reinforce the Hold narrative.

For a confidential discussion on how managed-care margin recovery, earnings-reset risk, and U.S. healthcare exposure can be assessed within a global portfolio allocation, contact our senior advisory team.