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Molina Healthcare (MOH) Up 32% in a Year: Is More Upside Left?

Shares of Molina Healthcare, Inc. MOH have gained 32% in a year, outperforming the industry’s increase of 31.3% and the Medical sector’s decline of 20.1%. The S&P 500 composite index has rallied 6.2% in the same time frame. With a market capitalization of $18.6 billion, the average volume of shares traded in the last three months was 0.6 million.

Solid membership growth, impressive acquisition history, a solid Medicaid business in place coupled with a sound financial position continue to drive Molina Healthcare’s performance. An upbeat 2022 guidance might act as a tailwind for the stock.

This Zacks Rank #3 (Hold) managed healthcare services provider beat estimates in three of the trailing four quarters.


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Can MOH Retain the Momentum?

The Zacks Consensus Estimate for Molina Healthcare’s 2022 earnings is pegged at $17.27, indicating a 27.6% increase from the prior-year reported figure on 7.7% higher revenues of $29.9 billion. The consensus estimate for 2023 earnings stands at $19.57, which suggests 13.3% growth from the year-ago reported figure on 5.6% increased revenues of $31.6 billion.

The Zacks Consensus Estimate for MOH’s 2022 earnings has moved north 0.9% in the past 30 days, reflecting analysts’ optimism. The expected long-term earnings growth rate is pegged at 18.8%, better than the industry’s average of 14.5%.

Revenues of Molina Healthcare continue to benefit from higher premium revenues stemming from strong membership growth across its Medicaid, Medicare and Marketplace segments. MOH boasts a strong Medicaid business, which continues to benefit from factors such as increased membership and contract wins similar to those in Nevada and Ohio. In fact, the total Medicaid premium revenues accounted for around 74% of Molina Healthcare’s revenues last year. As of Dec 31, 2021, the Medicaid membership of MOH witnessed growth of 20.3% from the prior-year comparable period. The company completed the buyout of Cigna’s Texas Medicaid contracts at the beginning of 2022 in a bid to drive its Medicaid business.

A bullish outlook for 2022 also makes MOH investors’ favorite. Revenues are forecasted at around $29.5 billion, which indicates an approximate rise of 6% from the 2021 reported figure. An increase in premium revenues is also anticipated to match the estimated revenue growth for 2022. Adjusted earnings per share are projected to be at a minimum of $17, representing year-over-year growth of 26%.  

Molina Healthcare possesses a sound accretive acquisition history. Announcing several buyouts in the past at attractive valuations, including those of YourCare Health Plan, Magellan Complete Care, Passport Health Plan, Affinity Health Plan and Cigna’s Texas Medicaid, fetched a run rate EPS impact of more than $3.00 per share to MOH. It resorts to prudent expense management programs, providing impetus to its margins.

MOH is backed with a solid financial standing on increasing cash balance and solid cash-generating abilities. The healthcare provider exited 2021 witnessing 6.8% year-over-year growth in cash and cash equivalents. Molina Healthcare generated cash from operations worth $2.1 billion in 2021. Meanwhile, MOH boasts of adequate free cash flows, which the company can deploy for pursuing a robust pipeline of opportunities in the days ahead.

Molina Healthcare has a favorable VGM Score of B. VGM Score helps identify stocks with the most attractive value, the best growth and the most promising momentum.

Stocks to Consider

Some better-ranked stocks in the medical space are Applied Therapeutics, Inc. APLT, Catalyst Pharmaceuticals, Inc. CPRX and IDEXX Laboratories, Inc. IDXX, 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.

Applied Therapeutics delivered a trailing four-quarter earnings surprise of 2.58%, on average. The Zacks Consensus Estimate for APLT’s 2022 earnings suggests an improvement of 9% from the year-ago reported figure. The consensus mark for 2022 earnings has moved north by 2.6% in the past 30 days. Applied Therapeutics has a Momentum Score of B.

The bottom line of Catalyst Pharmaceuticals outpaced earnings estimates in three of the last four quarters and met once, the average surprise being 30.56%. The Zacks Consensus Estimate for CPRX's 2022 earnings has moved north by 2.6% in the past 60 days. Catalyst Pharmaceuticals has a VGM Score of B.

IDEXX Laboratories outpaced earnings estimates in each of the last four quarters, the average surprise being 18.55%. The Zacks Consensus Estimate for IDXX’s 2022 earnings indicates a rise of 9.9% year over year, while the same for revenues suggests an improvement of 10.3%. The consensus mark has moved north by 1.1% in the past 60 days. IDEXX Laboratories has a Growth Score of B.

Catalyst Pharmaceuticals stock has gained 83.9% in a year. Meanwhile, shares of Applied Therapeutics and IDEXX Laboratories have lost 92.2% and 4%, respectively, in the same time frame.


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