Centene (CNC) delivered a stronger-than-expected Q2, but investor attention shifted to management's outlook for Medicaid margins, which may not meaningfully recover until H2 2027, RBC Capital said in a Tuesday note.

The analysts noted that management raised its 2026 revenue outlook by $6 billion to a range of $193.5 billion to $197.5 billion, but cautioned that about $0.50 of Q2 adjusted EPS was driven by non-recurring settlement items.

RBC said management maintained its Medicaid health benefits ratio outlook despite favorable July 1 rate updates, citing higher acuity and increased attrition in the Medicaid expansion population, while lowering its Medicaid membership forecast to an 8% to 9% year-over-year decline from the previously expected 6% decline.

Meanwhile, higher guidance was driven mainly by Centene's Marketplace business, where the company raised its full-year pretax margin outlook but added that the delayed recovery in Medicaid margins is likely to remain the primary focus for investors despite the strong quarterly results.

RBC maintained its sector perform rating on the stock and its $71 price target.

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