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Why Should You Hold Molina Healthcare (MOH) in Your Portfolio?

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Molina Healthcare, Inc. (MOH - Free Report) has been in investors’ good books, riding on solid first-quarter results and restructuring initiatives.

Over the past 30 days, the company has witnessed its current-year earnings estimate move 1.8% north from the year-ago quarter.

It retained investors' bullish sentiments by maintaining its beat streak in all the last four quarters, the average being 17.7%. This, in turn, underlines its operational excellence.

Now let us discuss what makes this leading health insurer an investor favorite.

Its return on equity — a profitability measure — is 33.9%, better than the industry average of 22.9%. The metric reflects the company’s effectiveness in utilizing its shareholders’ money, which impresses investors.

The company's first-quarter earnings gained from its growing revenues and increased membership in Medicaid and Marketplace. It also includes the positive impact of buyouts that closed in the second half of last year.

Several contract wins add to its membership base. Membership of Molina Healthcare increased 21% and 35% year over year in 2020 and during the first quarter of 2021, respectively, attributable to well-performing Medicare, Medicaid and Marketplace businesses. Various buyouts, such as that of YourCare led to membership growth for the company.

In April, management announced that the company’s Ohio health plan unit is chosen as an awardee in all three regions across the state. Scheduled to be effective early 2022, the new contract for Molina Healthcare’s Ohio health plan will provide medical care coverage to Medicaid beneficiaries through the state’s Covered Family and Children, Expansion, and Aged, Blind or Disabled programs. Some of its peers, namely Humana Inc. (HUM - Free Report) and Centene Corporation (CNC - Free Report) also strengthened their membership base through contract wins.

Inorganic growth is a steady key growth trajectory for most health insurers. Last year, Molina Healthcare closed the buyout of Magellan Complete Care (MCC) line of business of Magellan Health, which serves more than 3.6 million members under government-sponsored healthcare programs across 18 states.

In April 2021, Molina Healthcare inked a deal to purchase Texas Medicaid and Medicare-Medicaid Plan (MMP) contracts and specific operating assets of Cigna for $60 million in cash. The transaction is likely to close during the second half of this year. The company also closed other acquisitions, such as YourCare and Passport during 2020, which led to an expanded membership. All these initiatives bode well.

Following stellar results, this presently Zacks Rank #3 (Hold) company raised outlook for the current year with respect to certain metrics. Adjusted EPS is now estimated to be at least $13 (compared with the prior guidance of $12.50-$13 per share).

Total revenues for 2021 are anticipated to be more than $25 billion (compared with the earlier projection of above $24 billion), implying 28.9% growth from the year-ago reported figure. Membership of the company is projected to be 3.9 million, which indicates a rise of 2.6% from the 2020 reported figure.
Its earnings estimate for 2020 stands at $13.17, suggesting an upside of 23.4% from the prior-year reported figure.

Zacks Rank and Price Performance

Shares of this company have rallied 37.7% in a year’s time, outperforming its  industry’s growth of 31.2%. You can see  the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

A better-ranked stock in the same space, The Joint Corp. (JYNT - Free Report) , has also gained 160.9% in the same time frame.

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Humana Inc. (HUM) - free report >>

Molina Healthcare, Inc (MOH) - free report >>

Centene Corporation (CNC) - free report >>

The Joint Corp. (JYNT) - free report >>