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Molina Healthcare (MOH) Up 4.3% Since Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for Molina Healthcare, Inc (MOH - Free Report) . Shares have added about 4.3% in that time frame.

Will the recent positive trend continue leading up to its next earnings release, or is MOH 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.

Molina Healthcare (MOH - Free Report) Tops Q1 Earnings, Updates '18 View

Molina Healthcare reported first-quarter 2018 adjusted earnings of $1.71 per share, which surpassed the Zacks Consensus Estimate of 81 cents by a whopping 111.1%. The bottom line also improved 16.3% from the year-ago quarter.

Including net impact of the reconciliation of 2017 Marketplace cost-sharing reduction (CSR) subsidies, restructuring costs and loss on debt extinguishment, net income came in at $1.64 per share in the reported quarter, having improved 19.7% from the year-ago period. This upside was attributable to an improved medical and administrative cost efficiency.  

In the quarter under review, total revenues of $4.6 billion declined 5.3% year over year, primarily driven by a decrease in premium revenues as well as premium tax revenues. Also, the top line missed the Zacks Consensus Estimate by 1.6%.

Quarterly Operational Update

For the first quarter, total operating expenses declined about 8.3% year over year to $4.4 billion. This improvement was attributable to lower medical care costs, cost of service revenues, general and administrative expenses, premium tax expenses and depreciation and amortization.

For the first quarter, medical care cost declined 9.5% year over year to $3.7 billion.

A persistently rising debt burden induced Molina Healthcare’s interest expenses to increase approximately 26.9% year over year to $33 million.

Financial Update

As of Mar 31, 2018, Molina Healthcare’s cash and cash equivalents increased 17% from year-end 2017 to $3.7 billion.

Total assets grew nearly 7.8% from the end of 2017 to $9.1 billion.

The company’s shareholder equity improved 16.2% from year-end 2017 to $1.6 billion.

Net cash provided by operating activities totaled $394 million for the first three months of 2018, which plunged 45.2% from $719 million for the same period in 2017.

2018 Guidance Revised

Adjusted net income per share is expected within the band of $4.24-$4.74 (up from the prior guidance of $3.23-$3.73).

Molina Healthcare is likely to generate total revenues of $18.7 billion in 2018 (down from the previous projection of $18.8 billion).

Medical Care Costs of $15.4 billion are projected to be incurred in 2018 (down from the earlier forecast of $15.6 billion).

The company estimates to incur General and administrative expenses of $1.4 billion in 2018 (in line with the preliminary estimate).

Net income is anticipated within $272-$306 million (up from the past prediction of $202-$236 million).

The company’s EBITDA is likely to range between $724 million and $768 million (up from the prior preliminary outlook of $632-$676 million).
 

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. There have been seven revisions higher for the current quarter compared to one lower.

VGM Scores

At this time, MOH has a strong Growth Score of A and a grade with the same score on the momentum front. The stock was also allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

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

Based on our scores, the stock is equally suitable for value, growth, and momentum investors.

Outlook

Estimates have been broadly trending upward for the stock and the magnitude of these revisions looks promising. Notably, MOH has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.




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