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Is a Beat in Store for Molina Healthcare (MOH) Q4 Earnings?

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Molina Healthcare, Inc (MOH - Free Report) is scheduled to report fourth-quarter 2018 results on Feb 11. In the last reported quarter, the company delivered a positive surprise of 75.8%.

Q4 Earnings Expectations

Molina Healthcare expected fourth-quarter earnings to be around $1.90 per share. This upside is most likely to be backed by higher membership and restructuring initiatives taken by the company. The company’s Medicaid business is also expected to carry on performing well in the fourth quarter.

However, the same would likely be offset by the Marketplace business, rising medical costs, tax rate and an increase in general and administrative expense ratio.

The Zacks Consensus Estimate for the company’s fourth-quarter earnings is pegged at $1.52, up 347% year over year.

However, its revenues might suffer due to poor performance by the Marketplace business. The Zacks Consensus Estimate for the company’s revenues is pegged at a decline of 7.8% year over year to $4.5 billion.

The company’s operational efficiency might have improved in the to-be-reported quarter.

However, administrative expense of the company is likely to increase in the fourth quarter due to higher marketing programs and certain transformation measures adopted by the company. The company earlier expected that the sale of Pathways would incur a loss of around 60 cents per share in the fourth quarter.

The company projected the general and administrative expense ratio to be 8%, primarily due to seasonal spending, IT project costs, costs related to transformation efforts, which would likely bear an impact on 2019 earnings.

Long-term debt of the company is likely to mount due to its growth-related investments.

Earlier, Molina Healthcare issued a projection for the medical care ratio regarding the second half in the upper 70s’ bracket because of shift in membership, utilization, etc.

Why a Likely Positive Surprise?

Our proven model conclusively shows that Molina Healthcare is likely to beat on earnings this to-be-reported quarter. This is because the stock needs to have the right combination of a positive Earnings ESP and a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen.

Earnings ESP: Molina Healthcare has an Earnings ESP of +2.89% as the Most Accurate Estimate of $1.57 is pegged higher than the Zacks Consensus Estimate of $1.52. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

Zacks Rank: Molina Healthcare sports a Zacks Rank of 1, which increases the predictive power of ESP. Further, with a positive ESP in the combination, the stock’s chances of beating estimates are significantly higher.

Conversely, the Sell-rated stocks (#4 or 5) should never be considered going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Upcoming Releases From Medical Sector

Some other stocks worth considering from the medical sector are as follows:

Adamas Pharmaceuticals, Inc. is set to report fourth-quarter 2018 earnings performance on Feb 28. The stock has an Earnings ESP of +5.15% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Tenet Healthcare Corporation (THC - Free Report) is slated to announce fourth-quarter earnings on Feb 25. It has a Zacks Rank of 3 and an Earnings ESP of +4.17%.

Alder BioPharmaceuticals, Inc. has an Earnings ESP of +13.86% and a Zacks Rank #2. The company is scheduled to release fourth-quarter earnings on Feb 25.

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