It has been about a month since the last earnings report for Molina (MOH). Shares have lost about 1.7% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Molina due for a breakout? 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 catalysts.
Molina Healthcare Q2 Earnings Beat Estimates, Rise Y/Y
Molina Healthcare’s second-quarter 2020 adjusted earnings of $4.79 per share beat the Zacks Consensus Estimate by 1.9%. Moreover, the bottom line soared 54% year over year on the back of higher revenues.
Total revenues of $4.6 billion missed the consensus mark by 1.7%.
However, the top line rose 10.1% year over year on increased membership.
Quarterly Operational Update
The company’s net income totaled $276 million, up 40.8% year over year.
Total operating expenses increased 6.8% year over year to $4.2 billion.
This deterioration was due to higher medical care costs, premium tax expenses and health insurer fees.
Molina Healthcare’s interest expenses climbed 9.1% year over year to $24 million.
Total membership under Government Program at the end of the second quarter stands at 3.6 billion, up 5.5% year over year.
Financial Update
As of Jun 30, 2020, Molina Healthcare’s cash and cash equivalents surged 34.7% to $3.3 billion from the level at 2019 end.
Total assets rose 16% from the level at 2019 end to $7.8 billion.
The company’s shareholder equity improved nearly 1.8% from the figure at 2019 end to $1.9 billion.
As of Jun 30, 2020, net cash flow provided by operating activities stands at $749 million, up 380% year over year. This upside was owing to solid operating results and the normal fluctuations in timing of premium receipts and government payment.
Business Update
On Jul 1, the company closed the buyout of certain assets of YourCare Health Plan, Inc.
2020 and 2021 Guidance
Following second-quarter results, the company reaffirmed its outlook for the current year.
It still expects earnings in the range of $11.20-$11.70 per share.
Molina Healthcare raised its 2020 total revenue guidance to $18.8 billion from the previous projection of $18.3 billion.
The company also announced 2021 premium outlook of $21.5 billion or 20% growth from the 2020 figure.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
VGM Scores
Currently, 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 trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Molina has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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