Molina Healthcare, Inc. MOH, a multi-state managed care company, continues to benefit on the back of growing premiums, contract wins, acquisitions and a sound financial position. A solid 2024 earnings per share outlook also reinforces investors’ confidence in the stock. The company’s shares have gained 15.4% in the past three months, outpacing the industry and S&P 500 Composite’s growth of 14.6% and 2.6%, respectively.

MOH stock is currently trading at $355.15, well below its 52-week high of $423.92, suggesting potential for further growth. The stock is trading above its 50-day and 200-day moving averages, indicating solid upward momentum.

MOH’s Three-Month Price Performance

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Key Points to Note for MOH Stock

Molina Healthcare's premium revenues have been bolstered by an expanding customer base, driven by the strength of its Medicaid and Medicare businesses. In the first half of 2024, premium revenues grew 19% year over year. Management projects premium revenues to witness 13-15% long-term growth. 

The company’s affordable health plans, offering comprehensive benefits, have led to contract wins that contribute to membership growth. It was awarded with new Medicaid contracts in Florida and Michigan this year. Extension of Virginia and Florida contracts also bode well. Medicaid and Medicare membership witnessed year-over-year increases of 4.2% and 51.2%, respectively, as of June 30, 2024.

An aging U.S. population, particularly the medically vulnerable demographic, is likely to sustain the strong demand for Molina Healthcare’s Medicare plans, which cater to individuals aged 65 years and older. It aims for further penetration of high-acuity, low-income dual-eligible populations. Due to the new CMS rules on Medicaid and Medicare integration, MOH might be able to attract dual-eligible members, poising it well for the future.

The non-occurrence of the California retro rate item, better results from new store additions and improving rates for the second half of 2024 should lead to improved performance in the Medicaid segment. The ability to serve underpenetrated markets poses MOH’s Marketplace business well for the future.

Over the years, MOH has expanded its capabilities, diversified its revenue streams and strengthened its geographic presence through a series of acquisitions. It purchased Bright Healthcare’s California Medicare business in January 2024.

This July, Molina Healthcare inked a definitive agreement to purchase ConnectiCare, which is expected to bolster the health insurer’s presence in Connecticut. The transaction is expected to close in the first half of 2025, upon obtaining the necessary federal and state regulatory approvals, along with the fulfillment of other standard closing conditions. 

Molina Healthcare’s financial strength enables continued business investment. Sound cash reserves and strong cash flow generation underscore its financial strength. Cash and cash equivalents came in at $4.4 billion as of June 30, 2024.

Estimates for MOH & Surprise History

The Zacks Consensus Estimate for Molina Healthcare’s 2024 adjusted earnings is currently pegged at $23.50 per share, indicating 12.6% year-over-year growth. The consensus mark for 2025 adjusted earnings per share indicates a further 12.9% jump. It beat earnings estimates in each of the past four quarters. This is depicted in the figure below.

Molina Healthcare, Inc Price and EPS Surprise

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

The Zacks Consensus Estimate for 2024 and 2025 revenues is pegged at $39.9 billion and $43.1 billion, respectively.

Risks

Despite the upside potential, there are a few factors that investors should keep an eye on.

MOH continues to witness an escalating expense level as a result of higher medical care costs, and general and administrative expenses. Higher expenses can put pressure on the company’s margins in the days ahead. 

Molina Healthcare's medical care ratio (MCR) continues to be on the rise. A higher MCR indicates a lower proportion of remaining premiums after the payment of insurance claims. In the first half of 2024, the MCR deteriorated 180 basis points in the Medicaid business compared with the same period in 2023.

Final Verdict: Hold MOH Stock for Now

Molina Healthcare's strong premium revenue growth, driven by expanding Medicaid and Medicare membership, solid contract wins, and strategic acquisitions, positions it well for future growth. Current shareholders may consider holding on to their shares due to MOH’s strong prospects. However, potential investors should keep an eye on its rising medical care costs.

Molina Healthcare currently carries a Zacks Rank #3 (Hold).

Key Picks

Some better-ranked stocks in the Medical space are LeMaitre Vascular, Inc. LMAT, Avanos Medical, Inc. AVNS and The Ensign Group, Inc. ENSG. Each stock presently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

LeMaitre Vascular’s earnings surpassed the Zacks Consensus Estimate in each of the last four quarters, the average surprise being 8.87%. The Zacks Consensus Estimate for LMAT’s 2024 earnings implies an improvement of 37%, while the same for revenues indicates growth of 13% from the respective 2023 figures.

Avanos Medical’s earnings surpassed estimates in three of the last four quarters and missed the mark once, the average surprise being 5.69%. The Zacks Consensus Estimate for AVNS’ 2024 earnings indicates a 35% rise from the 2023 figure.

Ensign Group’s earnings outpaced estimates in each of the trailing four quarters, the average surprise being 1.40%. The Zacks Consensus Estimate for ENSG’s 2024 earnings indicates a 14.1% rise, while the same for revenues implies an improvement of 13.1% from the respective 2023 reported figures.

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Molina Healthcare, Inc (MOH) : Free Stock Analysis Report

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