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