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Molina Healthcare (MOH) Beats on Q3 Earnings & Revenues
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Molina Healthcare Inc. (MOH - Free Report) reported third-quarter 2016 adjusted net income per share of 85 cents that handily beat the Zacks Consensus Estimate of 76 cents by 11.8%. Earnings also improved 10.4% year over year and 27% from the sequentially prior quarter.
A reduction in administrative expense ratio, lower effective tax rate and improved profitability among non-marketplace products were primarily accountable for this upside.
Strategically structured product portfolio along with tactical geographic diversification not only boosted Molina Heathcare’s operating efficiency but also significantly contributed to the growth in earnings.
Operational Update
Operating revenues rose 24% year over year to $4.5 billion, mainly due to the increase in premium revenues, service revenues, premium tax revenues and Health insurer fee revenues and investment income. Also, revenues surpassed the Zacks Consensus Estimate by 2.3%.
Premium revenues jumped 24% year over year to $4.2 billion due to strong enrolment growth. Service revenues soared 182% year on year to $133 million. Premium tax revenues of $127 million recorded year-over-year growth of 28.3%. Health insurer fee revenues of $85 million also reflected 5% growth over the prior-year quarter.
Further, Molina Healthcare’s investment income grew 80% year over year to $9 million despite sustained low interest rate.
Total operating expenses rose 26.6% year over year to $4.4 billion due to higher Medical care costs, increased cost of service revenues, a rise in general and administrative expenses, higher premium tax expenses, increase in Health Insurance Fee expense, along with a hike in depreciation and amortization costs.
Medical Care Cost rose 24.3% year over year to $3.7 billion. Cost of Service revenue soared 250% from the prior-year quarter to $119 million. General and Administrative expenses went up to $343 million, reflecting a 19.5% year-over-year increase. Premium tax expenses and Health Insurance Fee expense rose 28.3% and 52.8% year over year, respectively.
Additionally, Molina Healthcare’s interest expenses increased 73.3% year over year to $26 million. Medical care ratio (ratio of medical care costs to premium revenues) was 89.4%, up 10 basis points year over year.
Operating income decreased 9.5% year over year to $105 million in the quarter. Premium tax ratio also rose 10 basis points to 2.9%.However, General and administrative expense ratio plunged 40 basis points to 7.6%.
Aggregate membership increased 22% year over year.
Financial Update
As of Sep 30, 2016, Molina Healthcare’s cash and cash equivalents rose 21.7% from the year-end 2015 level to $2.8 billion. As of Sep 30, 2016, total assets increased 13.6% to $7.5 billion from $6.6 billion at the end of 2015. Molina Healthcare’s shareholder equity rose 13% from year-end 2015 to $1.7 billion at the end of the reported quarter.
Net cash from operating activities amounted to $355 million in the quarter compared with $258 million a year ago, primarily due to a significant increase in deferred revenues.
Among the other firms in the finance sector that have reported their third-quarter earnings so far, the bottom line at Aetna Inc. and UnitedHealth Group Inc. (UNH - Free Report) beat their respective Zacks Consensus Estimate, while RLI Corp. (RLI - Free Report) missed the same.
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Molina Healthcare (MOH) Beats on Q3 Earnings & Revenues
Molina Healthcare Inc. (MOH - Free Report) reported third-quarter 2016 adjusted net income per share of 85 cents that handily beat the Zacks Consensus Estimate of 76 cents by 11.8%. Earnings also improved 10.4% year over year and 27% from the sequentially prior quarter.
A reduction in administrative expense ratio, lower effective tax rate and improved profitability among non-marketplace products were primarily accountable for this upside.
Strategically structured product portfolio along with tactical geographic diversification not only boosted Molina Heathcare’s operating efficiency but also significantly contributed to the growth in earnings.
Operational Update
Operating revenues rose 24% year over year to $4.5 billion, mainly due to the increase in premium revenues, service revenues, premium tax revenues and Health insurer fee revenues and investment income. Also, revenues surpassed the Zacks Consensus Estimate by 2.3%.
Premium revenues jumped 24% year over year to $4.2 billion due to strong enrolment growth. Service revenues soared 182% year on year to $133 million. Premium tax revenues of $127 million recorded year-over-year growth of 28.3%. Health insurer fee revenues of $85 million also reflected 5% growth over the prior-year quarter.
Further, Molina Healthcare’s investment income grew 80% year over year to $9 million despite sustained low interest rate.
Total operating expenses rose 26.6% year over year to $4.4 billion due to higher Medical care costs, increased cost of service revenues, a rise in general and administrative expenses, higher premium tax expenses, increase in Health Insurance Fee expense, along with a hike in depreciation and amortization costs.
Medical Care Cost rose 24.3% year over year to $3.7 billion. Cost of Service revenue soared 250% from the prior-year quarter to $119 million. General and Administrative expenses went up to $343 million, reflecting a 19.5% year-over-year increase. Premium tax expenses and Health Insurance Fee expense rose 28.3% and 52.8% year over year, respectively.
Additionally, Molina Healthcare’s interest expenses increased 73.3% year over year to $26 million. Medical care ratio (ratio of medical care costs to premium revenues) was 89.4%, up 10 basis points year over year.
Operating income decreased 9.5% year over year to $105 million in the quarter. Premium tax ratio also rose 10 basis points to 2.9%.However, General and administrative expense ratio plunged 40 basis points to 7.6%.
Aggregate membership increased 22% year over year.
Financial Update
As of Sep 30, 2016, Molina Healthcare’s cash and cash equivalents rose 21.7% from the year-end 2015 level to $2.8 billion. As of Sep 30, 2016, total assets increased 13.6% to $7.5 billion from $6.6 billion at the end of 2015. Molina Healthcare’s shareholder equity rose 13% from year-end 2015 to $1.7 billion at the end of the reported quarter.
Net cash from operating activities amounted to $355 million in the quarter compared with $258 million a year ago, primarily due to a significant increase in deferred revenues.
MOLINA HLTHCR Price, Consensus and EPS Surprise
MOLINA HLTHCR Price, Consensus and EPS Surprise | MOLINA HLTHCR Quote
Zacks Rank and Stocks to Consider
Molina Healthcare presently carries Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Among the other firms in the finance sector that have reported their third-quarter earnings so far, the bottom line at Aetna Inc. and UnitedHealth Group Inc. (UNH - Free Report) beat their respective Zacks Consensus Estimate, while RLI Corp. (RLI - Free Report) missed the same.
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>