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Here's Why You Should Hold Molina (MOH) in Your Portfolio
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Molina Healthcare, Inc.'s (MOH - Free Report) accretive acquisitions, rising top line, growth initiatives, strong performing government business, contract wins and membership growth make it worth retaining in one’s portfolio. Also, its favorable growth estimates boost investors' confidence.
The company currently has a VGM Score of A.
Zacks Rank & Price Performance
MOH currently carries a Zacks Rank #3 (Hold). In the past three months, the stock has gained 2% compared with the industry’s growth of 1.2%.
Image Source: Zacks Investment Research
Optimistic Growth Projections
The Zacks Consensus Estimate for MOH’s 2023 earnings is pegged at $20.14, indicating a 12.4% increase from the year-ago reported figure of $17.92. The same for MOH’s 2023 revenues is pegged at $33 billion, indicating a 3.3% increase from the year-ago reported figure of $32 billion.
Impressive Earnings Surprise History
MOH boasts an impressive surprise record. Its earnings outpaced estimates in each of the trailing four quarters, the average being 5.4%.
Return on Equity (ROE)
Return on equity, a measure reflecting how efficiently a company utilizes shareholders’ money, was 36.2% in the trailing 12 months, better than the industry’s average of 24.8%.
Tailwinds
MOH has been witnessing growth in revenues over the last few years, banking on improved premiums. Its premium revenues grew 4.7% in the first quarter of 2023. Thus, Molina estimates revenues for 2023 to increase 3.1% to around $33 billion, while premium revenues are projected to grow 4% to $32 billion in 2023.
MOH envisions achieving 4% growth in premium revenues on the back of continued expansions, stronger membership growth and contract wins, partially offset by a decline in the Marketplace business.
Another revenue source for Molina Healthcare is investment income, as it invests the premium received to service claim demands in the future. Given the rising interest rate environment, its investment income should continue to improve.
Molina Healthcare’s inorganic growth trend is impressive as it does not move away from pursuing ambitious acquisitions to drive its growth. Strategic buyouts also fuel premiums. Along with inorganic growth initiatives, MOH also won new state contracts in California, Iowa and Nebraska, highlighting its unwavering focus on growing its business organically. Indiana LTSS contract was also an impressive addition, fueling future earnings growth.
A strong financial position remains an additional tailwind for Molina Healthcare. The health insurer has strong cash reserves to aid in repurchasing shares and paying off debts in the future. The company’s operating cash flow for the quarter increased to $916 million from $363 million year over year. This should instill confidence in shareholders.
Key Concerns
However, there are a few factors that are impeding the stock’s growth lately.
MOH’s high medical care ratio, which implies a smaller amount of premium left after paying insurance claims, is a concern. Nevertheless, we believe that a systematic and strategic plan of action will drive growth in the long term.
The Zacks Consensus Estimate for Tenet Healthcare’s 2024 earnings indicates 10.5% year-over-year growth. The Zacks Consensus Estimate for THC’s 2023 earnings has moved 0.9% north in the past seven days.
The Zacks Consensus Estimate for Addus Homecare’s 2023 earnings indicates 10.9% year-over-year growth. The Zacks Consensus Estimate for ADUS’s 2023 earnings has moved 0.5% north in the past 30 days.
The Zacks Consensus Estimate for Davita’s 2024 earnings indicates 12.8% year-over-year growth. The Zacks Consensus Estimate for DVA’s 2023 earnings has moved 9.6% north in the past seven days.
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Here's Why You Should Hold Molina (MOH) in Your Portfolio
Molina Healthcare, Inc.'s (MOH - Free Report) accretive acquisitions, rising top line, growth initiatives, strong performing government business, contract wins and membership growth make it worth retaining in one’s portfolio. Also, its favorable growth estimates boost investors' confidence.
The company currently has a VGM Score of A.
Zacks Rank & Price Performance
MOH currently carries a Zacks Rank #3 (Hold). In the past three months, the stock has gained 2% compared with the industry’s growth of 1.2%.
Image Source: Zacks Investment Research
Optimistic Growth Projections
The Zacks Consensus Estimate for MOH’s 2023 earnings is pegged at $20.14, indicating a 12.4% increase from the year-ago reported figure of $17.92. The same for MOH’s 2023 revenues is pegged at $33 billion, indicating a 3.3% increase from the year-ago reported figure of $32 billion.
Impressive Earnings Surprise History
MOH boasts an impressive surprise record. Its earnings outpaced estimates in each of the trailing four quarters, the average being 5.4%.
Return on Equity (ROE)
Return on equity, a measure reflecting how efficiently a company utilizes shareholders’ money, was 36.2% in the trailing 12 months, better than the industry’s average of 24.8%.
Tailwinds
MOH has been witnessing growth in revenues over the last few years, banking on improved premiums. Its premium revenues grew 4.7% in the first quarter of 2023. Thus, Molina estimates revenues for 2023 to increase 3.1% to around $33 billion, while premium revenues are projected to grow 4% to $32 billion in 2023.
MOH envisions achieving 4% growth in premium revenues on the back of continued expansions, stronger membership growth and contract wins, partially offset by a decline in the Marketplace business.
Another revenue source for Molina Healthcare is investment income, as it invests the premium received to service claim demands in the future. Given the rising interest rate environment, its investment income should continue to improve.
Molina Healthcare’s inorganic growth trend is impressive as it does not move away from pursuing ambitious acquisitions to drive its growth. Strategic buyouts also fuel premiums. Along with inorganic growth initiatives, MOH also won new state contracts in California, Iowa and Nebraska, highlighting its unwavering focus on growing its business organically. Indiana LTSS contract was also an impressive addition, fueling future earnings growth.
A strong financial position remains an additional tailwind for Molina Healthcare. The health insurer has strong cash reserves to aid in repurchasing shares and paying off debts in the future. The company’s operating cash flow for the quarter increased to $916 million from $363 million year over year. This should instill confidence in shareholders.
Key Concerns
However, there are a few factors that are impeding the stock’s growth lately.
MOH’s high medical care ratio, which implies a smaller amount of premium left after paying insurance claims, is a concern. Nevertheless, we believe that a systematic and strategic plan of action will drive growth in the long term.
Stocks to Consider
Some better-ranked stocks from the broader medical space are Tenet Healthcare Corp (THC - Free Report) , Addus Homecare Corporation (ADUS - Free Report) and Davita Inc (DVA - Free Report) . Each of these companies presently sports a Zacks Rank #1(Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Tenet Healthcare’s 2024 earnings indicates 10.5% year-over-year growth. The Zacks Consensus Estimate for THC’s 2023 earnings has moved 0.9% north in the past seven days.
The Zacks Consensus Estimate for Addus Homecare’s 2023 earnings indicates 10.9% year-over-year growth. The Zacks Consensus Estimate for ADUS’s 2023 earnings has moved 0.5% north in the past 30 days.
The Zacks Consensus Estimate for Davita’s 2024 earnings indicates 12.8% year-over-year growth. The Zacks Consensus Estimate for DVA’s 2023 earnings has moved 9.6% north in the past seven days.