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Magellan Health (MGLN) Q2 Earnings Beat Estimates, Down YoY

Zacks Equity Research

Magellan Health, Inc.’s MGLN earnings per share of 86 cents beat the Zacks Consensus Estimate by 3.6%, but were down 5.5% year over year.

Revenues of $1.81 billion were down 1.1% year over year, due to reduction in Magellan Complete Care (MCC) Florida business and Medicare Part D footprint and PBM healthplan  contract loss. This was partly offset by growth in MCC of Virginia and new PBM employer business. Revenues beat the Zacks Consensus Estimate by 4%.

Magellan Health, Inc. Price, Consensus and EPS Surprise

Magellan Health, Inc. Price, Consensus and EPS Surprise

Magellan Health, Inc. price-consensus-eps-surprise-chart | Magellan Health, Inc. Quote

Segment profit of $45.6 million was down 18% year over year due to decline in contribution from its Healthcare segment, partly offset by a slight increase in profit from Pharmacy Benefit Management (PBM) segment.

Total cost and expense of $1.79 increased 1.1% year over year due to higher cost of goods sold.

Capital Position

Cash flow from operations for the six months ended Jun 30, 2019 was $21.1 million, down 28% year over year.

As of Jun 30, 2019, the company's cash and cash equivalents totaled $272.3 million, up 4% from year-end 2018 level.

Guidance

For 2019, the company affirmed its previously issued earnings per share guidance range of $3.70-$4.69 and revenues of $7-$7.2 billion.

Our Take

Earnings visibility provided by the management in the reported quarter provides us some relief on the company’s ability to deliver better results in the second half. Moreover, the quarter’s earnings beat and reiteration of 2019 guidance reflect improving business fundamentals, particularly after the earnings miss and guidance cut in the recent past. A rebound in the company’s PBM business led by reduction in cost of goods sold and strong medical pharmacy business is particularly impressive.

Zacks Rank and Performance of Other Players

Magellan Health carries a Zacks Rank #3 (Hold). Other players in the medical space that have reported second-quarter earnings so far are UnitedHealth Group, Inc. UNH, Anthem Inc. ANTM and Wellcare Health Plans, Inc. WCG, each beating their Zacks Consensus Estimate by 4.1%, 0.65% and 5.12%, respectively.

 You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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