On Monday (NASDAQ:MNDY), agilon health Inc (NYSE: NYSE:AGL) experienced a change in stock rating as JMP Securities shifted its stance from Market Outperform to Market Perform. This adjustment follows the company's third-quarter financial report, which revealed revenues and earnings that fell short of expectations.
The healthcare company reported its third-quarter results last Thursday, after the market closed, announcing a revenue of $1.45 billion. This figure represents a 28% increase year-over-year but still did not meet the analyst's projection of $1.47 billion. The adjusted EBITDA for the quarter was a loss of $96 million, significantly missing both the analyst's estimate of a $19.1 million loss and the consensus estimate of a $20.1 million loss.
The downgrade was attributed to a combination of factors, including a higher cost trend and negative development from the previous year, primarily due to Part D. Additionally, the impact from risk adjustments was lower than anticipated.
The third quarter also saw a recognition of $60 million in unfavorable prior-period development related to claims from 2023, and $25 million of elevated third-quarter medical expenses continued the trend of high current-year costs.
For the second half of 2024, agilon health's financial outlook appears less optimistic than earlier in the year. The revised forecast suggests a steep decline in medical margin, now expected to drop by approximately 44%, reaching $225 million at the midpoint of the revised range.
The company's recent financial performance and revised projections have led to a more cautious perspective on the stock from JMP Securities, as reflected in the updated rating. Investors and market watchers will be keeping an eye on how agilon health adjusts to these challenges in the coming quarters.
In other recent news, agilon health reported mixed results in its Third Quarter 2024 earnings call. Despite strong growth in Medicare Advantage membership, which rose 37% year-over-year to 525,000 members, and a 28% increase in total revenue to $1.45 billion, the company faced significant medical margin losses and a lowered medical margin guidance for 2024.
The company's CFO, Jeff Schwaneke, reported a medical margin loss of $58 million, and an adjusted EBITDA loss of $96 million.
In response to these challenges, agilon health has announced plans to exit certain unprofitable partnerships and payer contracts, which may affect future membership and revenue. Despite these strategic shifts, the company remains optimistic about its future, emphasizing improvements in medical costs and quality.
The company has raised its full-year membership guidance to 527,000 members and increased its revenue guidance to $6.057 billion. Looking ahead, the company expects a medical margin foundation of around $325 million for 2025. These recent developments indicate agilon health's commitment to improving its business model and execution for future growth.
InvestingPro Insights
The recent downgrade of agilon health Inc (NYSE: AGL) by JMP Securities is further reflected in the company's current financial metrics and market performance. According to InvestingPro data, AGL's stock has taken a significant hit, with a 31.09% decline in the past week and a 42.86% drop over the last month. This aligns with the market's reaction to the company's disappointing third-quarter results and revised outlook.
Despite the revenue growth of 54.1% in the last twelve months, AGL is struggling with profitability. The company's gross profit margin stands at a concerning -0.93%, supporting JMP Securities' observation of higher cost trends. An InvestingPro Tip notes that AGL is "quickly burning through cash," which could be a red flag for investors considering the company's financial health.
Another InvestingPro Tip highlights that the stock is "trading near 52-week low," with the price at just 13.37% of its 52-week high. This suggests that the market has significantly repriced AGL's stock in light of its recent performance and future prospects.
For investors seeking a more comprehensive analysis, InvestingPro offers 13 additional tips for AGL, providing a deeper understanding of the company's financial situation and market position.
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