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Molina (MOH) Up 7.4% Since Last Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for Molina (MOH - Free Report) . Shares have added about 7.4% 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 the most recent earnings report in order to get a better handle on the important drivers.

Molina Healthcare Q4 Earnings & Revenues Top Estimates

Molina Healthcare’s fourth-quarter 2018 adjusted earnings of $3.88 per share surpassed the Zacks Consensus Estimate of $1.52 by a whopping 155.3%. This upside was driven by higher premium revenue as well as decreasing expenses. The bottom line also reversed the year-ago period’s loss of 34 cents.

For the quarter under review, total revenues came in at $4.6 billion, beating the Zacks Consensus Estimate by 1.8%. However, the top line declined 5.7% year over year, mainly due to lower premium revenues and service revenues.



Quarterly Operational Update

The company’s net income totaled $201 million against its year-earlier period's loss of $262 million.

Total operating expenses declined about 16.8% year over year to $4.3 billion. This improvement was attributable to lower medical care costs and cost of service revenues.

For the fourth quarter, medical care cost was down 11.2% year over year to nearly $3.8 billion.

Molina Healthcare’s interest expenses were down 27.2% year over year to $24 million.

In the quarter under review, the company sold its Pathways behavioral health subsidiary due to which it suffered a net loss of $32 million.

The total membership by Government Program for 2019 stands at 3.8 billion, down 14.2% year over year.

Financial Update

As of Dec 31, 2018, Molina Healthcare’s cash and cash equivalents saw a reduction of 11.3% to $2.8 billion from the level at year-end 2017.

Total assets fell 15.6% from 2017 end to $7.1 billion.

The company’s shareholder equity improved nearly 23.2% from the figure at year-end 2017 to $1.6 billion.

For the fourth quarter, net cash outflow from operating activities stands at $123 million, narrower than the year-ago period's net cash outflow of $153 million.

Full-Year Highlights

Total revenues for 2019 declined 5% to $18.9 billion. Net income per share stands at $10.61 against the prior-year period's net loss of $9.07.

2019 Guidance

For 2019, the company expects its premium revenues to be $15.8 billion. Its total revenues are projected at $16.3 billion.

Moreover, Medicare costs are expected to be $13.7 billion. General and administrative expenses are estimated at $1.2 billion. Net income of the company is anticipated in the band of $600-$630 million. EBITDA is projected in the bracket of $975-$1025 million.

Net income per share is predicted to be $9.25-$9.75. Medicaid and Medicare membership is forecast to be around 3.2 million whereas Marketplace membership is estimated to be around 250-275 million.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

VGM Scores

At this time, Molina has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of A on the value side, putting it in the top 20% 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.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions indicates a downward shift. It comes with little surprise Molina has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.




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