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Here's Why You Should Retain Molina (MOH) in Your Portfolio
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Molina Healthcare, Inc. (MOH - Free Report) growth initiatives, improving top line, strong performing government business, contract wins and membership growth make it worth retaining in one’s portfolio. Also, its favorable growth estimates are confidence boosters for investors.
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 9.1% compared with the industry’s growth of 1.5%.
Image Source: Zacks Investment Research
Optimistic Growth Projections
The Zacks Consensus Estimate for MOH’s 2023 earnings is pegged at $20.19, indicating a 12.7% 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.
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%.
Key Drivers
MOH has been witnessing consistently growing revenues over the last few years 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. The company expects its state contracts to grow to 21 in 2024 from 19 in 2023.
MOH’s flagship Medicaid business is expected to continue contributing to the top line in the future. It made up 80% of MOH’s total revenues in 2023. With numerous contract wins aiding the company, it expects premium revenues to be $36 billion in 2024. The company’s Marketplace business is gaining pace and is expected to return to mid-single-digit target margins in 2023.
Molina Healthcare also earns through 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 and Texas contract win 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 (MCR), which implies a smaller amount of premium left after paying insurance claims, is a concern. The company expects consolidated MCR to be 88% in 2023, in line with the 2022 figure. Nevertheless, we believe that a systematic and strategic plan of action will drive growth in the long term.
Ligand Pharmaceuticals’ earnings surpassed estimates in two of the last four quarters and missed the mark twice, the average surprise being 21.50%. The Zacks Consensus Estimate for LGND’s 2023 earnings indicates a rise of 9.6% from the year-ago actuals. The consensus mark for LGND’s 2023 earnings has moved 26.2% north in the past 60 days.
The bottom line of Masimo beat estimates in each of the trailing four quarters, the average beat being 10%. The Zacks Consensus Estimate for MASI’s 2023 earnings indicates a rise of 3.7%, while the same for revenues suggests an improvement of 19.7% from the respective prior-year tallies. The consensus mark for MASI’s 2023 earnings has moved 0.2% north in the past 60 days.
The bottom line of Alcon beat estimates in each of the trailing four quarters, the average beat being 8.9%. The Zacks Consensus Estimate for ALC’s 2023 earnings indicates a rise of 17.9%, while the same for revenues suggests an improvement of 8% from the respective prior-year tallies. The consensus mark for ALC’s 2023 earnings has moved 2.3% north in the past 60 days.
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Here's Why You Should Retain Molina (MOH) in Your Portfolio
Molina Healthcare, Inc. (MOH - Free Report) growth initiatives, improving top line, strong performing government business, contract wins and membership growth make it worth retaining in one’s portfolio. Also, its favorable growth estimates are confidence boosters for investors.
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 9.1% compared with the industry’s growth of 1.5%.
Image Source: Zacks Investment Research
Optimistic Growth Projections
The Zacks Consensus Estimate for MOH’s 2023 earnings is pegged at $20.19, indicating a 12.7% 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.
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%.
Key Drivers
MOH has been witnessing consistently growing revenues over the last few years 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. The company expects its state contracts to grow to 21 in 2024 from 19 in 2023.
MOH’s flagship Medicaid business is expected to continue contributing to the top line in the future. It made up 80% of MOH’s total revenues in 2023. With numerous contract wins aiding the company, it expects premium revenues to be $36 billion in 2024. The company’s Marketplace business is gaining pace and is expected to return to mid-single-digit target margins in 2023.
Molina Healthcare also earns through 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 and Texas contract win 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 (MCR), which implies a smaller amount of premium left after paying insurance claims, is a concern. The company expects consolidated MCR to be 88% in 2023, in line with the 2022 figure. 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 Ligand Pharmaceuticals (LGND - Free Report) , Masimo Corporation (MASI - Free Report) and Alcon Inc. (ALC - Free Report) . Each of these companies presently carries a Zacks Rank #2(Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Ligand Pharmaceuticals’ earnings surpassed estimates in two of the last four quarters and missed the mark twice, the average surprise being 21.50%. The Zacks Consensus Estimate for LGND’s 2023 earnings indicates a rise of 9.6% from the year-ago actuals. The consensus mark for LGND’s 2023 earnings has moved 26.2% north in the past 60 days.
The bottom line of Masimo beat estimates in each of the trailing four quarters, the average beat being 10%. The Zacks Consensus Estimate for MASI’s 2023 earnings indicates a rise of 3.7%, while the same for revenues suggests an improvement of 19.7% from the respective prior-year tallies. The consensus mark for MASI’s 2023 earnings has moved 0.2% north in the past 60 days.
The bottom line of Alcon beat estimates in each of the trailing four quarters, the average beat being 8.9%. The Zacks Consensus Estimate for ALC’s 2023 earnings indicates a rise of 17.9%, while the same for revenues suggests an improvement of 8% from the respective prior-year tallies. The consensus mark for ALC’s 2023 earnings has moved 2.3% north in the past 60 days.