Molina (MOH) Down 3.6% Since Last Earnings Report: Can It Rebound?

It has been about a month since the last earnings report for Molina (MOH). Shares have lost about 3.6% in that time frame, outperforming 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 its most recent earnings report in order to get a better handle on the important drivers.

Molina Healthcare's Q4 Earnings Surpass, Decline Y/Y

Molina Healthcare’s fourth-quarter 2019 adjusted earnings of $2.73 per share surpassed the Zacks Consensus Estimate by 4.2% on the back of declining expenses. However, the bottom line fell 29.6% year over year, mainly due to lower revenues.

Also, total revenues of $4.2 billion came almost in line with the Zacks Consensus Estimate. However, the top line was down 8.4% year over year, mainly due to loss of Medicaid membership.

Quarterly Operational Update

The company’s net income totaled $168 million, down 16.4% year over year.

Total operating expenses decreased 7.1% year over year to $4 billion. This improvement was attributable to lower Medical care costs and null cost of service revenues.

For the quarter under review, medical care cost was down 6.1% year over year to nearly $3.5 billion.

Molina Healthcare’s interest expenses dropped 16.7% year over year to $20 million owing to constant repayment of convertible notes.

Total membership by Government Program for 2019 stands at 3.3 billion, down 12.8% year over year.

Financial Update

As of Dec 31, 2019, Molina Healthcare’s cash and cash equivalents saw a reduction of 13.2% to $2.4 billion from the level at 2018 end.

Total assets fell 5.1% from the level at 2018 end to $6.7 billion.

The company’s shareholder equity improved nearly 19% from the figure at 2018 end to $1.9 billion.

For 2019, net cash flow from operating activities stands at $427 million against 2018’s net cash outflow of $314 million.

Share Repurchase and Dividend Update

In December 2019, the company’s board of directors authorized a share buyback plan of up to $500 million. During the fourth quarter, Molina Healthcare received $305 million of dividends from regulated health plan subsidiaries.

2020 Guidance

Following fourth-quarter results, the company issued its 2020 outlook. It expects earnings in the range of $11.20-$11.70 per share.
It also projects premium revenue growth of 7.4%.

For the current year, the company anticipates its premium revenues to be $17.4 billion and total revenues to be $18.3 billion. Total membership of the company is predicted to be 3.4 million.

Full-Year Update

Net income for the year ended Dec 31, 2019 increased 4.2% year over year to $737 million. Revenues for the year totaled $16.8 billion, down 11% year over year.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month. The consensus estimate has shifted -13.38% due to these changes.

VGM Scores

At this time, Molina has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly 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.