There was good news and bad news the last time Molina Healthcare (NYSE: MOH) reported its quarterly results. In April, the health insurer announced solid year-over year earnings growth. However, revenue fell significantly from the prior-year period.
Any questions that investors had about Molina's second quarter were answered when the company announced its Q2 results after the market closed on Tuesday. Here's what you need to know from Molina's quarterly update.
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By the numbers
Molina's top-line performance again went in the wrong direction in the second quarter. Revenue fell 14% year over year to $4.19 billion. However, that was still enough to top the consensus analysts' estimate of $4.08 billion.
The company's generally accepted accounting principles (GAAP) net income in the second quarter was $196 million, or $3.06 per share. This was a slight decline from Molina's result in the prior-year period when the company announced GAAP net income of $202 million. Thanks to share buybacks, though, Molina's GAAP earnings per share (EPS) increased from the prior-year period amount of $3.02.
Molina announced adjusted earnings of $199 million, or $3.11 per share, in the second quarter. This represented a decrease from $206 million reported in the prior-year period, although share buybacks resulted in an increase of nearly 1% from the adjusted earnings of $3.08 per share reported in the same quarter of 2018. Analysts were expecting Q2 adjusted earnings of $2.66 per share.
Behind the numbers
Molina expected a decline in premium revenue. And that's exactly what happened. Premium revenue fell 10% year over year to $4 billion. Lower Medicaid membership driven by the loss of the New Mexico Medicaid contract, as well as the resizing of the Florida Medicaid contract, were the primary reasons for the decreased premium revenue results in the second quarter.
It's difficult for a company to grow earnings when its revenue falls by a double-digit percentage. Molina experienced this firsthand in Q2.
Despite the decline in revenue and earnings, there were some positives for the company in the second quarter. Because of Molina's continued repayment of its debt, interest expenses decreased by 31% to $22 million. The company also gained $14 million from repayment of convertible notes during Q2. And because revenue was lower, Molina's income tax expense also decreased significantly from the prior-year period.
The company boosted its full-year 2019 guidance. Molina now projects GAAP earnings per share between $11.20 and $11.50, up from its previous forecast of a range of $10.50 to $11.00.
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