Molina (MOH) Up 3.5% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for Molina (MOH). Shares have added about 3.5% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Molina due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Molina Healthcare Q2 Earnings Beat on High Premiums, '23 View Raised
Molina Healthcare reported second-quarter 2023 adjusted earnings per share (EPS) of $5.65, which beat the Zacks Consensus Estimate by 11.9%. The bottom line improved 24.2% year over year.
Total revenues of $8,327 million improved 3.4% year over year in the quarter under review. Also, the top line beat the consensus mark by 0.5%.
It reported strong second-quarter results thanks to growing premiums, increased membership, and Medicaid and Medicare strength. Yet, the positives were partially offset by an elevated expense level.
Quarterly Operational Update
Premium revenues of Molina Healthcare were $8,042 million in the second quarter, which rose 3.1% year over year and met our estimate, resulting from membership growth in its Medicaid and Medicare businesses.
Total operating expenses of $7,884 million climbed 2.5% year over year in the second quarter due to higher medical care costs, general and administrative expenses, partially offset by lower premium tax costs. Our estimate for total operating expenses was $7,913.2 million.
The consolidated medical care ratio (medical costs as a percentage of premium revenues) or MCR came in at 87.5%, which improved from the prior year’s figure of 88.1% and beat our estimate of 87.8%, reflecting strong management of medical costs and operating efficiency.
Adjusted general and administrative expense ratio increased 60 bps year over year to 7.4%, reflecting increased business implementation spending in the quarter, ahead of contract wins. Interest expenses of $27 million remained flat year over year in the second quarter, lower than our estimate of $29.1 million.
MOH reported a net income of $309 million, which rose 24.6% year over year in the quarter under review, beating our estimate of $273.2 million on the back of higher premiums.
As of Jun 30, 2023 total membership increased 1.1% year over year to roughly 5.2 million members, beating our estimate of more than 5 million members. Strength across the Medicaid and Medicare businesses resulted in the upside, partially offset by a weak Marketplace business.
Financial Update (as of Jun 30, 2023)
Molina Healthcare exited the second quarter with cash and cash equivalents of $4,910 million, which climbed from $4,006 million at 2022-end. Total assets of $13,661 million improved from $12,314 million at 2022-end.
Long-term debt of $2,178 million inched up from $2,176 million at 2022-end.
Total stockholders’ equity of $3,621 million rose from $2,964 million at 2022-end.
During the first half of 2023, MOH’s net cash provided by operating activities was $1,403 million. The figure skyrocketed from $731 million a year ago, due to the difference in timings of government payables and receivables, and also as a result of growth in operations.
2023 Guidance
The company raised the guidance for adjusted EPS, which is now estimated to be a minimum of $20.75, implying a rise from the 2022 reported figure of $17.92. Adjusted net income is now predicted to be $1,206 million.
The company had previously guided premium revenues to be roughly $32 billion, indicating an improvement of 4% from the 2022 reported figure of $30.9 billion. Molina Healthcare’s total revenues were estimated to be $33 billion in 2023, suggesting 3.1% growth from the 2022 figure of $32 billion. Total membership at 2023-end was estimated to be 5.1 million, down 3.8% from the 2022-end figure. Consolidated MCR was expected at 88%, in line with the 2022 figure.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates flatlined during the past month.
VGM Scores
At this time, Molina has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Molina has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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Molina Healthcare, Inc (MOH) : Free Stock Analysis Report
