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Molina Healthcare (MOH) Q2 Earnings Beat on Growing Membership

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Molina Healthcare, Inc. (MOH - Free Report) reported second-quarter 2024 adjusted earnings per share (EPS) of $5.86, which beat the Zacks Consensus Estimate by 2.3%. Also, the bottom line grew 3.7% from the year-ago period.

Total revenues amounted to $9.9 billion, which improved 18.7% year over year. Also, the top line outpaced the consensus mark by 0.9%.

The strong second-quarter results were aided by membership growth in each of the business lines of Molina Healthcare. This, in turn, drove premiums, the most significant contributor to a health insurer’s top line. However, the upside was partly offset by escalating medical care costs.

Molina Healthcare, Inc Price, Consensus and EPS Surprise

Molina Healthcare, Inc Price, Consensus and EPS Surprise

Molina Healthcare, Inc price-consensus-eps-surprise-chart | Molina Healthcare, Inc Quote

Acquisition Update

The company has agreed to acquire ConnectiCare, an EmblemHealth subsidiary, for $350 million. The amount represents 25% of 2024 estimated premium revenues of $1.4 billion. The acquiree serves around 140,000 members through Marketplace, Medicare and some commercial products in Connecticut. MOH is expected to fund the acquisition, which will likely close in the first half of next year, with cash on hand.

Q2 Operational Update

Premium revenues of $9.4 billion climbed 17.5% year over year in the quarter under review, higher than the Zacks Consensus Estimate of $9.3 billion and our estimate of $9.2 billion. The improvement stemmed from contract wins, buyouts and an expanding nationwide footprint, partly offset by Medicaid redeterminations.

As of Jun 30, 2024, total membership advanced 8% year over year to around 5.6 million, which met both the Zacks Consensus Estimate and our model estimate. The health insurer witnessed year-over-year increases in customers within its Medicaid, Medicare and Marketplace businesses.

Investment income rose 18.6% year over year to $115 million but missed the consensus mark of $117.7 million, as well as our model estimate of $116.5 million.

Total operating expenses of $9.4 billion increased 19.8% year over year and were higher than our model estimate of $9.2 billion due to a significant rise in medical care costs coupled with higher general and administrative expenses and premium tax expenses. Adjusted general and administrative expense ratio decreased to 6.9% in the second quarter from 7.4% a year ago. Interest expenses of $28 million rose 3.7% year over year.

The consolidated medical care ratio (medical costs as a percentage of premium revenues), or MCR, was 88.6% in the quarter under review. The metric rose from 87.5% a year ago and came higher than the consensus mark of 88.2%. Also, the figure was marginally higher than our estimate of 88.5%.

Molina Healthcare’s adjusted net income increased 4.3% year over year to $341 million and surpassed our estimate of $328.1 million.

Financial Update (as of Jun 30, 2024)

Molina Healthcare exited the second quarter with cash and cash equivalents of $4.4 billion, which declined from the 2023-end level of $4.8 billion. Total assets of $15.2 billion rose from the $14.9 billion figure at 2023 end.

Long-term debt remained flat at $2.2 billion from the 2023-end level.

Total stockholders’ equity of $4.8 billion advanced from the $4.2 billion figure at 2023 end.

Net cash used in operating activities amounted to $5 million in the first half of the year, against net cash provided by operations of $1.4 billion a year ago. The significant decline was due to differences in timing in government receivables and payables.

2024 Guidance Reiterated

Management continues to expect premium revenues at around $38 billion, which indicates an improvement of around 17% from the 2023 reported figure. Adjusted EPS is forecasted at a minimum of $23.50 this year, which implies a rise of roughly 13% from the 2023 figure. Increased net investment income and extension of Virginia and Florida contracts in the second half of 2024 are expected to offset headwinds witnessed in Medicaid in the second quarter.

Earlier it provided guidance for revenues at $39.6 billion in 2024, suggesting 16.1% growth from the 2023 figure. Adjusted net income is projected to be $1.4 billion while GAAP net income is expected at $1.3 billion for 2024. Total membership is estimated to be 5.7 million by 2024 end, which indicates growth of 14.7% from the 2023 figure. Consolidated MCR is likely to stay at 88.2%.

Zacks Rank & Key Picks

Molina Healthcare currently carries a Zacks Rank #4 (Sell).

Investors interested in the broader Medical space may look at some better-ranked players like The Cigna Group (CI - Free Report) , Universal Health Services, Inc. (UHS - Free Report) and Quest Diagnostics Incorporated (DGX - Free Report) , each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for Cigna’s full-year 2024 earnings is pegged at $28.48 per share, which suggests 13.5% year-over-year growth. CI beat earnings estimates in each of the past four quarters, with an average surprise of 3.3%. The consensus mark for revenues is pegged at almost $235.7 billion, up 20.7% year over year.

The Zacks Consensus Estimate for Universal Health Services’ 2024 bottom line suggests 31.2% year-over-year growth. UHS has witnessed one upward estimate revision over the past month against no movement in the opposite direction. It beat earnings estimates in all the last four quarters, with an average surprise of 14.6%.

The Zacks Consensus Estimate for Quest Diagnostics’ 2024 full-year earnings implies a 1.7% increase from the year-ago reported figure. DGX beat earnings estimates in each of the last four quarters, with an average surprise of 3.3%. The consensus mark for its current-year revenues is pegged at $9.5 billion, which indicates a 2.6% year-over-year increase.

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