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Molina Inc. (MOH - Analyst Report) is set to report its second quarter 2013 financial results after the closing bell on Jul 25. Last quarter, it posted a +146.15% surprise. Let’s see how things are shaping up for this announcement.

Growth Factors this Past Quarter

Molina has been witnessing rising medical care costs, which are compressing margins. The company’s high operating expenses also pose a risk to the operating leverage. Any substantial elevation in operating expenses and medical costs could heavily weigh on the margins and bottom line. Moreover, investment income, a prime component of Molina’s revenues, has been declining since 2007, primarily due to lower interest rates.

Earnings Whispers?

Our proven model does not conclusively show that Molina is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP (Read: Zacks Earnings ESP: A Better Method) and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the case here as you will see below.

Negative Zacks ESP: That is because the Most Accurate Estimate stands at 29 cents, while the Zacks Consensus Estimate is higher at 31 cents. That is a difference of -6.45%.

Zacks Rank #1 (Strong Buy): Molina carries a Zacks Rank #1 (Strong Buy). This increases the predictive power of the ESP. However, this combined with a negative ESP makes prediction difficult. We caution against stocks with Zacks Rank #4 and #5 (Sell rated stocks) going into the earnings announcement.

Other Stocks to Consider

Here are some other companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:

WellPoint Inc. (WLP - Analyst Report) – Earnings ESP of +3.37% and Zacks Rank #1 (Strong Buy)

Humana Inc. (HUM - Analyst Report) – Earnings ESP of +1.63% and Zacks Rank #1 (Strong Buy)

Aetna Inc. (AET - Analyst Report) – Earnings ESP of +0.73% and Zacks Rank #2 (Buy)

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