Back to top

Momentum

Magellan Health Services, Inc. (MGLN - Snapshot Report) is one of the rare names that has traded higher in the weak market of the last two months. The relative strength comes on the heels of a strong Q1 performance that included a 24% earnings surprise, providing more support and momentum for this Zacks #1 rank stock.

Company Description

Magellan Health Services, Inc. provides managed behavioral healthcare, radiology benefits management, specialty pharmaceutical management and Medicaid administration products and services in the United States. The company was founded in 1959 and has a market cap of $1.66 billion.

Healthcare demand is in a secular growth trend as the country's large baby-boomer demographic heads into the golden years. That trend has been driving industry growth, on display with Magellan Health's strong Q1 results from late May that came in well ahead of expectations.

First-Quarter Results

Although revenue for the period was down 5% from last year to $693 million, earnings came in strong at $1.02, 24% ahead of the Zacks Consensus Estimate, where the company has an average earnings surprise of 29% over the last four quarters.

Magellan's Medicaid Administration segment saw the biggest sales gain, up 36% from last year to $53 million. Cost reduction also helped, with direct service costs and operating expenses down $7 million from last year to $131.5 million.

Buying Shares Back

The company returned some value to its shareholders during the quarter too, buying back 3.2 million shares year to date for $156 million.

Financial Profile

Magellan also has a great balance sheet, with cash and short-term investments up $90 million from last year to $596 million against marginal total debt of less than $1 million.

Estimates

We saw estimates nudge higher on the good quarter, with the current year adding 21 cents to $3.61. The next-year estimate is pegged at $4.11, a bullish 14% growth projection.

Valuation

On the valuation front, MGLN trades with a forward P/E of 14.5X, a slight premium to its peer average of 13X.

12-Month Chart

On the chart, MGLN recently hit a new 52-week high on the strong earnings momentum. Look for support from the long-term trend on any weakness, take a look below.

Michael Vodicka is the Momentum Stock Strategist for Zacks.com. He is also the Editor in charge of the Zacks Momentum Trader Service.

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
RPC INC RES 24.91 +8.35%
LITHIA MOTO… LAD 94.59 +4.60%
DELTA AIR L… DAL 39.15 +3.90%
FLAMEL TECH… FLML 14.51 +3.50%
SOUTHWEST A… LUV 28.87 +2.92%