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Molina Healthcare, Inc. (MOH - Analyst Report) lowered its earnings expectation to $1.45 per share for 2013 from $1.55 per share guided during the fourth-quarter 2012 earnings release. The expectation was lowered to incorporate the impact from the $550 million cash convertible senior notes issuance and the anticipated increases to its premium revenue.

Molina projects operating income to be higher by $10 million or 13 cents per share, largely driven by higher premium revenue. Premium revenue is projected to be $6.7 billion. However, the new issuance will lower the full-year earnings by 23 cents per share (includes 21 cent of non-cash interest expense). Nonetheless, the combined positive impact of 5 cents from higher investment income and share repurchases will somewhat mute the negative impact from issuance.

Molina initially intended to issue $375 million cash convertible senior notes but finally made an issue of $550 million. This increase led to an additional interest expense of about 10 cents per share.

Earnings before interest, tax, deprecation and amortization (EBITDA) is now guided to be $255 million, up from $245 million.

It is likely that the lower guidance for 2013 prompted the share price to decline 2.1% to close at $32.75 on Wednesday.  

Total revenue for 2013 remains unchanged at $7 billion. In addition, medical care costs and medical care ratio remain unchanged at $5.9 billion and 88%, respectively.

Earlier this month, Molina reported fourth-quarter 2012 net earnings per share of 54 cents, significantly surpassing the Zacks Consensus Estimate of 21 cents and 51 cents earned in the year-ago quarter.

Among other health maintenance organizations, Aetna Inc (AET - Analyst Report) expects operating earnings per share of a minimum of $5.40 in 2013, while Health Net Inc. (HNT - Analyst Report) projects net income guidance of $2.00–$2.10 per share for the same period. Humana Inc. (HUM - Analyst Report) projected its earnings per share to be $7.60–$7.80 for 2013.

Molina carries a Zacks Rank #2 (Buy).

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