Molina Reports Strong 1Q Earnings

Zacks

Molina Healthcare Inc. (MOH) reported first-quarter 2013 net earnings per share of 64 cents, significantly surpassing the Zacks Consensus Estimate of 26 cents. Moreover, earnings per share increased from the year-ago quarter number of 39 cents. Net income for the quarter came in at $29.9 million compared with $18.1 million in the prior-year quarter.

Total revenue for the reported quarter climbed to $1.59 billion from $1.37 billion in the prior-year quarter. Total revenue came in line with the Zacks Consensus Estimate.

Premium revenues surged 17% year over year to $1.5 billion. Moreover, Molina’s service revenues increased to $49.8 million from $42.2 million in the year-ago quarter. Additionally, rental income increased to $4.7 million in the quarter from $4.3 million in the year-ago quarter. However, investment income declined to $1.5 million from $1.7 million a year ago. Premium tax also declined to $37 million from $42.2 million in the first quarter of 2012.

Total expenses of Molina also surged 13.7% year over year to $1.52 billion. The surge was driven by medical care costs that escalated to $1.29 billion from $1.13 billion in the prior-year quarter, cost of service revenues that increased to $39.8 million from $30.5 million, general and administrative (G&A) expenses that escalated to $141.4 million from $121.5 million and depreciation and amortization (D&A) costs that increased to $16.6 million from $15.0 million. However, premium tax expenses declined to $37.0 million from $42.2 million in the prior-year quarter.

Operating income was $67.1 million in the reported quarter compared to $33.4 million in the comparable prior-year quarter. Additionally, Molina’s interest expense jumped to $13 million from $4.3 million in the year-ago quarter. Further, medical care ratio (ratio of medical care costs to premium revenue) improved to 86.1% from 88.1% in the year-ago quarter.

Financial Update

Molina exited the first quarter with $1.6 billion in cash and investments, while the parent company had cash and investments of $450.5 million. At the end of Mar 2013, Molina’s total assets increased to $2.5 billion from $1.9 billion at 2012 end, while shareholder equity decreased to $764.2 million from $782.3 million as of Dec 31, 2012.

During the reported quarter, cash flow from operations declined to $20.1 million from $50.6 million in the prior-year quarter.

Outlook for 2013

Molina expects operating earnings per share of $1.55 in 2013.

Results at Other HMOs

Another health maintenance organization (:HMO), WellPoint Inc. (WLP) reported first-quarter 2013 adjusted income of $2.94 per share, beating the Zacks Consensus Estimate of $2.37. Adjusted income also surpassed the year-ago earnings of $2.34 per share by 25.6%.

UnitedHealth Group Inc. (UNH) reported first-quarter 2013 earnings of $1.16 per share, in line with the Zacks Consensus Estimate. Earnings, however, declined 11.4% on a year-over-year basis.

Other peers such as Humana Inc. (HUM) are expected to release their first-quarter earnings shortly.

Zacks Rank

Molina currently carries a Zacks Rank #3 (Hold).

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