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Molina Healthcare Hits 52 Week High: Is Further Upside Left?

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 On Jun 22, 2018, Molina Healthcare, Inc. (MOH - Free Report) hit a 52 week high of $103.27 but ended the trading session at $101.48. The stock seemed to have gained investors’ attention after the recent receipt of Florida Medicaid contract.

In a year’s time, shares of the company have surged 43% compared with the industry’s growth of 33%.


 

What Led the Shares to Rally

Molina Healthcare was awarded contracts to continue serving Florida Medicaid members in Region 8 (includes Collier, Lee and Sarasota counties) and Region 11 (includes Miami-Dade). Although the awards might currently diminish the size of its Florida Medicaid footprint across seven regions of the state, it still looks an upside for the company, which received no award during the first procurement, which would have otherwise caused a revenue loss from the entire Florida contract.

The company was however, successful in getting contracts for two regions after it challenged the state’s decision. The company will also be able to expand and sustain the Marketplace as well as Medicare businesses in Florida.  These contracts are likely to fetch $550 million in annual revenues for the company starting Jan 1, 2019.

The news brought in much relief to the company having recently lost Medicaid contract in Mexico.  

Moreover, the Florida market presents a very good Medicaid growth opportunity for Molina Healthcare, given a large population of the state being enrolled in Medicaid plans.  

Also, the receipt of Florida contract provides investors with a positive view on the company, reflecting its fare chances of performing well in the upcoming Pureto Rico and Texas Medicaid contracts.

This further throws light on the efforts made by the company’s CEO Joseph Zubretsky to focus more on growing the most important area of the company’s business, which is, request for proposals to  provide greatest returns on investment.

Further Upside Left?

Moving ahead, the stock should get a further boost as it is showing marked changes from transformation initiatives, undertaken recently. New leadership, cost-cutting efforts, profit improvement initiatives and a focus on improving efficiency of core operating processes should aid the company’s results.

The company’s first-quarter results, beating estimates by 111.11% and its increased 2018 guidance bear an evidence of early success, achieved from its transformational plans. Moreover, the company recently disclosed its progress on turnaround initiatives in detail, which showed that it is well on track for overall, well-balanced growth.

Zacks Rank

Molina Healthcare carries a Zacks Rank #3 (Hold). Investors interested in the Medical HMO industry might take a look at some better-ranked stocks, namely WellCare Health Plans, Inc. (WCG - Free Report) , Triple-S Management Corporation (GTS - Free Report) and Humana Inc. (HUM - Free Report) .

WellCare offers managed care services for government-sponsored health care programs. Sporting a Zacks Rank #1 (Strong Buy), the company delivered an average four-quarter positive surprise of 51.70%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Triple-S and its subsidiaries offer a portfolio of managed care and related products in the commercial, Medicare and Medicaid markets in Puerto Rico, the United States. It holds a Zacks Rank #2 (Buy) and came up with an average four-quarter beat of a whopping 260.65%.

Humana operates as a health and well-being company in the United States. It has a Zacks Rank of 2 and pulled off an average four-quarter earnings surprise of 6.16%.

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