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Why Is Magellan Health (MGLN) Up 0.7% Since Last Earnings Report?

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A month has gone by since the last earnings report for Magellan Health . Shares have added about 0.7% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Magellan Health due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Magellan Health Q2 Earnings Top Estimates

Magellan Health, Inc.’s second-quarter 2020 earnings of 84 cents per share beat the Zacks Consensus Estimate by 68%. However, the bottom line was down 2.3% year over year.

Meanwhile, revenues of $1.1 billion surpassed the Zacks Consensus Estimate by 5.11% but the top line was down 4.7% year over year. This decrease was largely attributable to net contract losses within the healthcare segment.

Segmental profit was up 6% year over year to $57 million. The company gained from reduced levels of medical utilization amid a decline in elective services across its healthcare businesses.

Healthcare segment’s profit of $60.8 million was up 48% year over year, driven by lower utilization trends in the specialty healthcare reporting unit due to COVID-19.

Pharmacy Management segment’s profit of $13.2 million plunged 57% year over year due to losses in the Medicare Part D business, customer settlements related to prior periods, and start-up costs associated with the Medi-Cal contract implementation.

Total costs and expenses slid 4.6% year over year to $1.09 billion on lower cost of care.

Capital Position (as of Jun 30, 2020)

The company's cash and cash equivalents totaled $160.4 million, up 39.4% from the level on Dec 31, 2019.

Total assets of the company increased 8.4% to $3.4 billion from the figure at 2019 end.

Total stockholder's equity rose 10.4% from the level on Dec 31, 2019 to $1.54 billion.

2020 Guidance

The company expects net revenues in the range of $4.4-$4.6 billion. Net income is projected in the bracket of $15-$27 million, which equates with an earnings per share range of59  cents to $1.06. Adjusted net income is envisioned in the band of $16-$28 million, which equates with an adjusted EPS range of 63 cents to $1.10. Segment profit for the full year  is forecast within $145-$165 million.

 

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -128.05% due to these changes.

VGM Scores

Currently, Magellan Health has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, Magellan Health has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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