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The Zacks Consensus Estimate for Molina’s second-quarter earnings per share is pegged at $5.73, which indicates growth of 1.4% from the prior-year quarter’s reported figure. The estimate decreased 4 cents in the past 30 days. The consensus mark for revenues stands at $9.8 billion, indicating 17.6% growth from the year-ago quarter’s reported number.
Image Source: Zacks Investment Research
Molina boasts a solid earnings surprise history. Its bottom line beat estimates in each of the trailing four quarters, the average surprise being 5.5%. This is depicted in the figure below:
Image Source: Zacks Investment Research
Earnings Whispers
Our proven model does not conclusively predict an earnings beat for Molina this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. However, that’s not the case here, as you see below.
Earnings ESP: Molina Healthcare has an Earnings ESP of -5.41%. You can uncover the best stocks before they’re reported with our Earnings ESP Filter.
Zacks Rank: MOH currently carries a Zacks Rank of 4 (Sell).
Factors to Note
The growing customer base in the Medicaid and Medicare businesses of Molina Healthcare is expected to have contributed to premium growth, the most significant contributor to the top line of a health insurer, in the second quarter. The Zacks Consensus Estimate for premiums indicates growth of 15.1% year over year in the second quarter. We expect Medicaid premiums to grow 9.2% year over year to $7.1 billion in the to-be-reported quarter. Our estimate for the Medicare premiums is $1.5 billion, up 44.5% year over year.
Numerous contract wins from federal and state authorities, renewal of agreements as well as buyouts are likely to have contributed to membership growth in MOH’s Medicaid and Medicare businesses. An aging U.S. population is likely to have sustained the solid demand for its Medicare plans in the second quarter. However, the disenrollment of members from Medicaid during the redetermination process is expected to have limited the membership figures of the Medicaid business. Membership growth within the Medicaid business is expected to increase 5.6% year over year, while the same for MOH’s Medicare business is projected to witness 42.5% year-over-year growth.
Marketplace membership, after falling 19.3% year over year in 2023, is expected to grow in each quarter of 2024. We expect the metric to grow 27.7% year over year in the second quarter of 2024. The redetermination process will fuel membership growth in this business. Given the company’s 75% book remains Silver, improved margins might have helped the bottom line in the second quarter. The company aims to focus on its Silver product, which will help it sustain mid-single-digit margins. Higher renewal rates are also expected to have benefited this business in the second quarter of 2024.
A favorable interest rate environment is likely to have driven higher investment income, which in turn, is likely to have aided revenue growth in the second quarter. The Zacks Consensus Estimate for investment income is pegged at $117.7 million, indicating a 21.4% rise year over year.
However, the medical care ratio (MCR) is expected to have remained high in the to-be-reported quarter due to elevated medical expenses. An uptick in MCR signals lower leftover premiums consequent to the payment of insurance claims. Medicaid MCR is expected to be impacted by the addition of new stores, which operate at a higher MCR in the first year. Rising supplemental benefits might have pushed Medicare MCR higher in the second quarter of 2024. The Zacks Consensus Estimate for overall MCR is 88.2% in the second quarter, which indicates a deterioration of 720 bps year over year.
Price Performance
Shares of Molina have plunged 19.1% against the industry’s rise of 6.1% in the year-to-date period. The stock also underperformed its sector and the S&P 500 Composite, which increased 6.9% and 16.1%, respectively, during the same time frame.
YTD Price Performance
Image Source: Zacks Investment Research
Conclusion
A high medical expense level is likely to have hurt the bottom line of Molina Healthcare in the to-be-reported quarter. This is likely to make an earnings beat uncertain in the second quarter, despite rising premiums and investment income.
Stocks to Consider
While an earnings beat looks uncertain for Molina, here are some companies from the broader Medical space that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this time around:
The Zacks Consensus Estimate for Cigna’s second-quarter earnings indicates a 4.7% year-over-year jump. CI beat earnings estimates in each of the past four quarters, the average surprise being 3.3%.
Cencora, Inc. (COR - Free Report) has an Earnings ESP of +1.01% and a Zacks Rank #2.
The Zacks Consensus Estimate for Cencora’s second-quarter earnings indicates 8.9% year-over-year growth. COR beat earnings estimates in each of the past four quarters, with an average surprise of 6.1%.
Universal Health Services, Inc. (UHS - Free Report) has an Earnings ESP of +8.65% and is a Zacks #2 Ranked player.
The Zacks Consensus Estimate for Universal Health’s second-quarter earnings indicates a 33.2% year-over-year jump. UHS beat earnings estimates in each of the past four quarters, the average surprise being 8.1%.
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Will High Medical Care Costs Hurt Molina's (MOH) Q2 Earnings?
Molina Healthcare, Inc. (MOH - Free Report) is slated to report second-quarter 2024 results on Jul 24, after market close.
The Zacks Consensus Estimate for Molina’s second-quarter earnings per share is pegged at $5.73, which indicates growth of 1.4% from the prior-year quarter’s reported figure. The estimate decreased 4 cents in the past 30 days. The consensus mark for revenues stands at $9.8 billion, indicating 17.6% growth from the year-ago quarter’s reported number.
Molina boasts a solid earnings surprise history. Its bottom line beat estimates in each of the trailing four quarters, the average surprise being 5.5%. This is depicted in the figure below:
Image Source: Zacks Investment Research
Earnings Whispers
Our proven model does not conclusively predict an earnings beat for Molina this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. However, that’s not the case here, as you see below.
Earnings ESP: Molina Healthcare has an Earnings ESP of -5.41%. You can uncover the best stocks before they’re reported with our Earnings ESP Filter.
Zacks Rank: MOH currently carries a Zacks Rank of 4 (Sell).
Factors to Note
The growing customer base in the Medicaid and Medicare businesses of Molina Healthcare is expected to have contributed to premium growth, the most significant contributor to the top line of a health insurer, in the second quarter. The Zacks Consensus Estimate for premiums indicates growth of 15.1% year over year in the second quarter. We expect Medicaid premiums to grow 9.2% year over year to $7.1 billion in the to-be-reported quarter. Our estimate for the Medicare premiums is $1.5 billion, up 44.5% year over year.
Numerous contract wins from federal and state authorities, renewal of agreements as well as buyouts are likely to have contributed to membership growth in MOH’s Medicaid and Medicare businesses. An aging U.S. population is likely to have sustained the solid demand for its Medicare plans in the second quarter. However, the disenrollment of members from Medicaid during the redetermination process is expected to have limited the membership figures of the Medicaid business. Membership growth within the Medicaid business is expected to increase 5.6% year over year, while the same for MOH’s Medicare business is projected to witness 42.5% year-over-year growth.
Marketplace membership, after falling 19.3% year over year in 2023, is expected to grow in each quarter of 2024. We expect the metric to grow 27.7% year over year in the second quarter of 2024. The redetermination process will fuel membership growth in this business. Given the company’s 75% book remains Silver, improved margins might have helped the bottom line in the second quarter. The company aims to focus on its Silver product, which will help it sustain mid-single-digit margins. Higher renewal rates are also expected to have benefited this business in the second quarter of 2024.
A favorable interest rate environment is likely to have driven higher investment income, which in turn, is likely to have aided revenue growth in the second quarter. The Zacks Consensus Estimate for investment income is pegged at $117.7 million, indicating a 21.4% rise year over year.
However, the medical care ratio (MCR) is expected to have remained high in the to-be-reported quarter due to elevated medical expenses. An uptick in MCR signals lower leftover premiums consequent to the payment of insurance claims. Medicaid MCR is expected to be impacted by the addition of new stores, which operate at a higher MCR in the first year. Rising supplemental benefits might have pushed Medicare MCR higher in the second quarter of 2024. The Zacks Consensus Estimate for overall MCR is 88.2% in the second quarter, which indicates a deterioration of 720 bps year over year.
Price Performance
Shares of Molina have plunged 19.1% against the industry’s rise of 6.1% in the year-to-date period. The stock also underperformed its sector and the S&P 500 Composite, which increased 6.9% and 16.1%, respectively, during the same time frame.
YTD Price Performance
Image Source: Zacks Investment Research
Conclusion
A high medical expense level is likely to have hurt the bottom line of Molina Healthcare in the to-be-reported quarter. This is likely to make an earnings beat uncertain in the second quarter, despite rising premiums and investment income.
Stocks to Consider
While an earnings beat looks uncertain for Molina, here are some companies from the broader Medical space that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this time around:
The Cigna Group (CI - Free Report) has an Earnings ESP of +1.59% and is a Zacks #2 Ranked player. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Cigna’s second-quarter earnings indicates a 4.7% year-over-year jump. CI beat earnings estimates in each of the past four quarters, the average surprise being 3.3%.
Cencora, Inc. (COR - Free Report) has an Earnings ESP of +1.01% and a Zacks Rank #2.
The Zacks Consensus Estimate for Cencora’s second-quarter earnings indicates 8.9% year-over-year growth. COR beat earnings estimates in each of the past four quarters, with an average surprise of 6.1%.
Universal Health Services, Inc. (UHS - Free Report) has an Earnings ESP of +8.65% and is a Zacks #2 Ranked player.
The Zacks Consensus Estimate for Universal Health’s second-quarter earnings indicates a 33.2% year-over-year jump. UHS beat earnings estimates in each of the past four quarters, the average surprise being 8.1%.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.