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Shares of U.S. health insurer Centene (NYSE:CNC) fell 4.5% to $91.39 in Friday morning trading while that of smaller rival Molina Healthcare (NYSE:MOH) gained 5% to $343.86, as investors reacted to the companies getting contract awards from California.
California's health care services department on Thursday said 28 contracts will be awarded to CNC, MOH and Elevance Health's (NYSE:ELV) Anthem Blue Cross Partnership Plan to deliver Medi-Cal services across 21 counties.
ELV stock was slightly lower at $491.92.
According to the announcement, CNC lost contracts in Los Angeles, Sacramento and Kern counties, a decision the company voiced disappointment over, adding that it was evaluating all options to appeal the decision.
"...the awards represent pretty close to a worst-case outcome for CNC with the crown jewel of the CA Medicaid program (Los Angeles county) set to transition from CNC to MOH," Well Fargo research said in a note, while downgrading its rating on CNC to equal weight from overweight.
"Conversely, for MOH the awards represent a best-case outcome and are actually more meaningful for MOH than CNC given the significant difference in revenue," Wells Fargo research said.
Wells Fargo's equal weight rating on CNC stock compares to a Wall Street average rating and a SA Authors rating of buy. Seeking Alpha's Quant system, which consistently beats the market, rates it hold.