Molina Healthcare, Inc (MOH - Free Report) has been in investor’s good books, riding high on its solid outlook and restructuring plus profitability improvement plan.
Its VGM Score of A is also impressive. Here V stands for Value, G for Growth and M for Momentum with the score being a weighted combination of all three factors.
Now let’s see what makes this stock an investor favorite.
The company has seen consistent growth in its revenue base over the past several years. Although the metric dropped in the first nine months of 2019, the company’s solid fundamentals, such as premium revenues would likely help the same grow going forward. Given the restructuring initiatives and developmental strategies, we expect the top line to continue rising moving ahead. The company estimates 10-12% revenue growth over the long term.
Molina has been gaining from its 2017 restructuring and profitability improvement plan. The plan included streamlining of organizational structure to improve efficiency as well as the speed and quality of decision-making. This initiative led to a total expense decline of 13.2% and 12.3% in 2018 and the first nine months of 2019, respectively. We expect this initiative to help curb costs further.
In fact, the company even divested its units, Pathways Health and Community Support, LLC and Molina Medicaid Solutions, which might help it focus on core growth areas.
We are also hopeful as there is an attractive pipeline of Medicaid opportunities. The company recently announced that its Kentucky health plan subsidiary was awarded a new five-year Kentucky Medicaid managed care contract, which would likely aid its growth in Medicaid business. We expect this momentum to continue in the future on the back of contract wins.
Following third-quarter results, the company hiked its 2019 outlook. It now expects its earnings in the range of $11.3-$11.5, tightened from the earlier guidance of $11.2-$11.5 per share. This should instill investor’s confidence in the stock.
However, its membership has been decreasing since 2018, which persistently bothers. The company expects its 2019 Marketplace end-of-year enrollment to decline to around 270,000 members due to attrition. Moreover, the company’s Medicaid membership suffered due to loss of contracts in Florida, New Mexico and Texas, which remains a concern.
In a year’s time, shares of this Zacks Rank #3 (Hold) have rallied 17%, underperforming its industry’s growth of 19.2%. Its earnings managed to surpass the Zacks Consensus Estimate in the trailing four quarters, the average being 51.6%.
Stocks to Consider
Investors interested in the medical sector might consider some better-ranked stocks like Select Medical Holdings Corporation (SEM - Free Report) , WellCare Health Plans, Inc. and Genesis Healthcare, Inc. . You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Select Medical Holdings operates critical illness recovery hospitals, rehabilitation hospitals, outpatient rehabilitation clinics and occupational health centers. In the trailing four quarters, the company’s average beat was 11.07%. The stock sports a Zacks Rank #1.
WellCare Health offers managed care services to government-sponsored health care programs. The company pulled off average positive surprise of 17.32% in the preceding four quarters. It carries a Zacks Rank #2 (Buy).
Genesis Healthcare operates skilled nursing facilities and assisted/senior living homes. In the last four quarters, the company delivered average beat of 80.96%. It has a Zacks Rank of 1.
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