A month has gone by since the last earnings report for Molina (MOH - Free Report) . Shares have added about 13.9% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Molina due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Molina Healthcare Tops Q2 Earnings, Updates '18 View
Molina Healthcare, Inc.’s second-quarter 2018 adjusted earnings of $2.25 per share surpassed the Zacks Consensus Estimate of $1.09 cents by a whopping 106.4%. This upside was driven by managed care fundamentals, margin recovery and effective performance management.
The bottom line also came in against the prior-year quarter’s loss of 1 cent.
Primarily related to theMarketplace risk adjustment, net income came in at $3.02 per share in the reported quarter, having soared 84% year over year.
In the quarter under review, total revenues of $4.8 billion declined 2.3% year over year, primarily driven by a decrease in premium revenues as well as premium tax revenues. However, the top line missed the Zacks Consensus Estimate by 5.6%.
Quarterly Operational Update
Total operating expenses declined about 14.1% year over year to $4.5 billion. This improvement was attributable to lower general and administrative expenses, premium tax expenses and restructuring and separation costs.
For the second quarter, medical care cost decreased 14.2% year over year to $3.8 billion.
A persistent rise in debt burden induced Molina Healthcare’s interest expenses to escalate approximately 18.5% year over year to $32 million.
As of Jun 30, 2018, Molina Healthcare’s cash and cash equivalents increased 6.5% from the level at year-end 2017 to $3.3 billion.
Total assets grew nearly 3.5% to $8.7 billion from the tally at 2017 end.
The company’s shareholder equity improved 24% from the figure at year-end 2017 to $1.6 billion.
Net cash used in operating activities totaled $80 million for the second quarter of 2018, which surged 70% from $47 million for the same period in 2017.
2018 Guidance Revised
Adjusted net income per share is expected in the band of $7.15-7.35 (up from the prior guidance of $4.24-$4.74).
Molina Healthcare is likely to generate total revenues of $18.8 billion in 2018 (up from the previous projection of $18.7 billion).
Medical Care Costs of $15.2 billion are projected to be incurred in 2018 (down from the earlier forecast of $15.4 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 $471-$484 million (up from the past prediction of $272-$306 million).
The company’s EBITDA is anticipated to range between $968-$985 million (up from the prior outlook of $724-$768 million).
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended upward during the past month. The consensus estimate has shifted 65.58% due to these changes.
Currently, Molina has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second 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 more suitable for momentum investors than those looking for value and growth.
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Molina has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.