It has been about a month since the last earnings report for Molina (MOH). Shares have lost about 4.4% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Molina due for a breakout? 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 Estimates, Rise Y/Y
Molina Healthcare second-quarter 2019 adjusted earnings of $3.11 per share surpassed the Zacks Consensus Estimate by 21.5%. Moreover, the bottom line improved 38% year over year, mainly on the back of lower expenses and the Meridian buyout.
Also, for the quarter under review, total revenues of $4.1 billion came ahead of the Zacks Consensus Estimate by 2.9%. However, the top line declined 14% year over year, mainly due to lower Medicaid membership and resizing of the Florida Medicaid contract as well as the exiting all but two Florida regions in 2018.
Quarterly Operational Update
The company’s net income totaled $196 million, down 3% year over year.
Total operating expenses decreased about 13.5% year over year to $3.9 billion. This improvement was attributable to lower medical care costs and no health insurer fees plus cost of service revenues.
For the second quarter, medical care cost was down 10% year over year to nearly $3.9 billion.
Molina Healthcare’s interest expenses dropped 31.3% year over year to $22 million due to constant payment of debts.
The total membership by Government Program for 2019 stands at 3.3 billion, down 17% year over year.
During the second quarter, Molina Healthcare received $345 million of dividends from regulated health plan subsidiaries.
As of Jun 30, 2019, Molina Healthcare’s cash and cash equivalents saw a reduction of 20.3% to $2.2 billion from the level at year-end 2018.
Total assets fell 6.5% from 2018 end to $6.7 billion.
The company’s shareholder equity improved nearly 5.4% from the figure at year-end 2018 to $1.7 billion.
For the first half of 2019, net cash outflow from operating activities stands at $156 million due to the government payment timing.
Following second-quarter results, the company hiked its 2019 outlook. It now expects its earnings in the range of 11.20-$11.50 per share, up from the prior estimate of $10.50 to $11.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
Currently, Molina has a poor Growth Score of F, however its Momentum Score is doing a lot better with a B. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Molina has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.
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