Top Managed Health Care Stock Pick From BofA Research

Investing.com -- BofA Research has identified its top pick in the managed health care sector, highlighting strong growth prospects and improved operational performance across key business segments.

The firm raised its price objective and maintained a positive outlook based on expected earnings growth and margin improvements heading into 2027. The analysis focuses on progress in Medicaid operations, Medicare performance, and exchange business trends.

1. Centene Corporation (CNC)

BofA Research rates Centene as a Buy with a price target of $82, up from $80 previously. The firm calls CNC its top pick in the managed health care sector. Centene expects to grow earnings per share in 2027 off both its adjusted baseline of $4.70 and its reported $5.20 figure, compared to consensus estimates of $5.25. The company's Medicaid business showed improvement with the medical loss ratio declining 30 basis points quarter-over-quarter and remains on track for a 93.5% MLR for the year. Centene expects fourth-quarter Medicaid membership to decline 8-9%, but the company is optimistic about 2026 rate increases of 5%, with 40% of rates updating on January 1, 2027. The Medicare segment outperformed expectations, with Part D pretax margins in the mid-to-high 3% range and membership expected to grow in 2027. Medicare Advantage is on track to reach breakeven in 2026, one year ahead of schedule. The exchange business is trending toward the higher end of the company's 4.5-5% guidance range. Centene plans to exit the HNT group commercial business in California over the next 18-24 months. BofA Research raised its estimates and now values the stock at 15.6 times earnings, compared to 16 times previously.

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