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Molina Healthcare, Inc. MOH has been in investors’ good books, riding on solid third-quarter results and restructuring initiatives.
It retained investors' bullish sentiments by maintaining its beat streak in all the last four quarters, the average being 14.8%. This, in turn, underlines its operational excellence.
Its return on equity — a profitability measure — is 43.2%, better than the industry average of 24.5%. The metric reflects the company’s effectiveness in utilizing its shareholders’ money, which impresses investors.
The company gained from higher admissions in the third-quarter, which added to its overall performance. Its membership increased 20.5% in the first nine months of 2020. We expect the same to rise on the back of contract wins and strategic initiatives.
Following the stellar results, the company reaffirmed its outlook for the current year, which should instill investor’s confidence in the stock. It still expects earnings in the range of $11.20-$11.70 per share. However, it raised its 2020 total revenue outlook to $19.6 billion, up from its prior projection of $18.8 billion. This was owing to the Passport buyout in Kentucky and the novation of the entity’s Medicaid contract to Molina Healthcare on Sep 1.Its core performance is anticipated to stay solid through the fourth quarter of 2020.
Over the past several years, the company has been witnessing growing revenues on the back of its strategic initiatives and membership growth. In the first nine months of 2020, the top line increased 13% year over year. We are hopeful that the metric will continue growing on its strategic initiatives and higher memberships.
Molina Healthcare has also been gaining traction from its restructuring and profitability improvement plan, which started in 2017. The plan included streamlining of organizational structure to improve efficiency as well as the speed and quality of decision-making. We expect this initiative to help curb costs going forward.
The leading health insurance giant has been partnering with companies as well as acquiring units to expand its presence. It entered into an agreement to acquire the Magellan Complete Care (MCC) line of business of Magellan Health, Inc. for a total deal value of $820 million. The transaction will serve more than 3.6 million members under the government-sponsored healthcare programs across 18 states. With this addition, the company is expected to build a better portfolio and gain an enhanced geographic diversity. The company also inked a deal to buy substantially all the assets of Affinity Health Plan, Inc. in September 2020.
All these initiatives bode well for the long haul.
Its earnings estimate for 2020 stands at $12.56, suggesting an upside of 8.6% from the prior-year reported figure.
Zacks Rank and Price Performance
Shares of this currently Zacks Rank #2 (Buy) company have surged 62.7% in a year’s time, outperforming its industry’s growth of 19%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Other companies in the same space, such as UnitedHealth Group Incorporated UNH, Centene Corporation CNC and Anthem Inc. ANTM have also gained 30.7%, 14% and 13.3% in the same time frame.
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