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Molina Healthcare (MOH) Up 26.9% in 6 Months: What Lies Ahead?
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Molina Healthcare, Inc.’s (MOH - Free Report) shares have jumped 26.9% in the past six months, outperforming the 8.4% increase of the industry, thanks to improving premium numbers, contract wins and Medicare membership growth. Headquartered in Long Beach, CA, Molina Healthcare is a multi-state managed care provider participating in government-sponsored healthcare programs catering to low-income persons.
Its ability to engage in inorganic growth initiatives and strong financial flexibility are major positives. Its cost-cutting initiatives continue to support profit growth. These factors collectively contributed to this Zacks Rank #2 (Buy) company's notable price appreciation. It has a market cap of $22.2 billion.
MOH currently carries a VGM Score of A. Our research shows that stocks with a Zacks Rank #1 (Strong Buy) or 2, when combined with a VGM Score of A or B, offer the best investment opportunities.
Image Source: Zacks Investment Research
Can It Retain Momentum?
The ingredients are there, and now let’s get into the details and show you how its estimates for the coming days stand.
The Zacks Consensus Estimate for Molina Healthcare’s 2023 full-year earnings is pegged at $20.82 per share, indicating a 16.2% rise from $17.92 a year ago. The company beat earnings estimates in each of the last four quarters, with an average surprise of 7.5%.
The consensus mark for full-year 2023 revenues stands at nearly $33.4 billion, suggesting a 4.4% rise from the prior-year reported number. Our model indicates significant increases in investment income and premiums, which are likely to support the top-line growth.
We expect 2023 investment income to surge nearly 167% year over year. Our model predicts almost 4% growth in premium revenues, primarily supported by a more than 10% increase in Medicare and a 4.5% gain in Medicaid business.
We expect Medicare membership to witness more than 12% growth in 2023 and continue on a low double-digit growth path for the next couple of years. Total membership was around 5.2 million as of Sep 30, 2023, which inched up 1% year over year. Its ability to win contracts will further increase that number. Last month, it agreed to pay a lower price for Bright HealthCare’s California Medicare business acquisition.
Molina Healthcare has been gaining from its cost-controlling efforts. Its restructuring and profitability improvement plans are expected to further curtail the cost growth rate. Its total operating expense increased 15.1% year over year in 2022. We expect the same to witness only around 3% growth in 2023.
The company’s ability to generate cash from operations is also impressive. In the trailing 12-month period, its free cash flow increased almost 200% to more than $2 billion, reflecting its operating strength. Also, MOH's cash and cash equivalents of $5.6 billion at the third quarter-end were much higher than the long-term debt of only $2.2 billion.
Risks
Despite the upside potential, there are a few factors that investors should keep an eye on.
MOH's valuation looks expensive at the moment, with the price-to-book ratio of 5.72X being higher than the industry's average of 3.75X. Also, tax credits are expensive, hence, continuous and high-intensity support from the government may diminish over time. Nevertheless, we believe that a systematic and strategic plan of action will drive Molina Healthcare’s long-term growth.
The Zacks Consensus Estimate for Motus GI’s 2023 bottom line suggests a 67.2% year-over-year improvement. MOTS has witnessed one upward estimate revision over the past 30 days against no movement in the opposite direction. It beat earnings estimates in all the last four quarters, with an average surprise of 40.2%.
The Zacks Consensus Estimate for Brookdale Senior’s full-year 2023 earnings indicates a 49.6% year-over-year improvement. BKD beat earnings estimates in three of the past four quarters and missed once, with an average surprise of 23.5%.
The Zacks Consensus Estimate for Centene’s 2023 full-year earnings implies a 15.1% increase from the year-ago reported figure. The consensus mark for its current-year revenues is pegged at $150.8 billion, up 4.4% year over year. CNC beat earnings estimates in two of the last four quarters and missed twice, with an average surprise of 5.6%.
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Molina Healthcare (MOH) Up 26.9% in 6 Months: What Lies Ahead?
Molina Healthcare, Inc.’s (MOH - Free Report) shares have jumped 26.9% in the past six months, outperforming the 8.4% increase of the industry, thanks to improving premium numbers, contract wins and Medicare membership growth. Headquartered in Long Beach, CA, Molina Healthcare is a multi-state managed care provider participating in government-sponsored healthcare programs catering to low-income persons.
Its ability to engage in inorganic growth initiatives and strong financial flexibility are major positives. Its cost-cutting initiatives continue to support profit growth. These factors collectively contributed to this Zacks Rank #2 (Buy) company's notable price appreciation. It has a market cap of $22.2 billion.
MOH currently carries a VGM Score of A. Our research shows that stocks with a Zacks Rank #1 (Strong Buy) or 2, when combined with a VGM Score of A or B, offer the best investment opportunities.
Image Source: Zacks Investment Research
Can It Retain Momentum?
The ingredients are there, and now let’s get into the details and show you how its estimates for the coming days stand.
The Zacks Consensus Estimate for Molina Healthcare’s 2023 full-year earnings is pegged at $20.82 per share, indicating a 16.2% rise from $17.92 a year ago. The company beat earnings estimates in each of the last four quarters, with an average surprise of 7.5%.
The consensus mark for full-year 2023 revenues stands at nearly $33.4 billion, suggesting a 4.4% rise from the prior-year reported number. Our model indicates significant increases in investment income and premiums, which are likely to support the top-line growth.
We expect 2023 investment income to surge nearly 167% year over year. Our model predicts almost 4% growth in premium revenues, primarily supported by a more than 10% increase in Medicare and a 4.5% gain in Medicaid business.
We expect Medicare membership to witness more than 12% growth in 2023 and continue on a low double-digit growth path for the next couple of years. Total membership was around 5.2 million as of Sep 30, 2023, which inched up 1% year over year. Its ability to win contracts will further increase that number. Last month, it agreed to pay a lower price for Bright HealthCare’s California Medicare business acquisition.
Molina Healthcare has been gaining from its cost-controlling efforts. Its restructuring and profitability improvement plans are expected to further curtail the cost growth rate. Its total operating expense increased 15.1% year over year in 2022. We expect the same to witness only around 3% growth in 2023.
The company’s ability to generate cash from operations is also impressive. In the trailing 12-month period, its free cash flow increased almost 200% to more than $2 billion, reflecting its operating strength. Also, MOH's cash and cash equivalents of $5.6 billion at the third quarter-end were much higher than the long-term debt of only $2.2 billion.
Risks
Despite the upside potential, there are a few factors that investors should keep an eye on.
MOH's valuation looks expensive at the moment, with the price-to-book ratio of 5.72X being higher than the industry's average of 3.75X. Also, tax credits are expensive, hence, continuous and high-intensity support from the government may diminish over time. Nevertheless, we believe that a systematic and strategic plan of action will drive Molina Healthcare’s long-term growth.
Other Key Picks
Some other top-ranked stocks in the medical space are Motus GI Holdings, Inc. (MOTS - Free Report) , Brookdale Senior Living Inc. (BKD - Free Report) and Centene Corporation (CNC - Free Report) . While Motus GI currently sports a Zacks Rank #1, Brookdale Senior and Centene carry a Zacks Rank #2 each. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Motus GI’s 2023 bottom line suggests a 67.2% year-over-year improvement. MOTS has witnessed one upward estimate revision over the past 30 days against no movement in the opposite direction. It beat earnings estimates in all the last four quarters, with an average surprise of 40.2%.
The Zacks Consensus Estimate for Brookdale Senior’s full-year 2023 earnings indicates a 49.6% year-over-year improvement. BKD beat earnings estimates in three of the past four quarters and missed once, with an average surprise of 23.5%.
The Zacks Consensus Estimate for Centene’s 2023 full-year earnings implies a 15.1% increase from the year-ago reported figure. The consensus mark for its current-year revenues is pegged at $150.8 billion, up 4.4% year over year. CNC beat earnings estimates in two of the last four quarters and missed twice, with an average surprise of 5.6%.