Molina Healthcare Inc. (MOH) reported second-quarter 2013 operating earnings per share of 34 cents, surpassing the Zacks Consensus Estimate of 31 cents. Earnings per share rebounded from the year-ago quarter’s loss of 71 cents. Operating income was $15.8 million in the reported quarter compared to loss of $33.1 million in the comparable prior-year quarter.
Net income for the quarter came in at $24.6 million or 53 cents per share compared with net loss of $37.3 million or 80 cents per share in the prior-year quarter. Results for the reported quarter include one-time non-cash charge of $3.9 million associated with warrants issued in connection with the convertible senior notes Molina had issued in Feb 2013, and income from discontinued operation of 19 cents per share.
Total revenue for Molina for the reported quarter climbed to $1.61 billion from $1.48 billion in the prior-year quarter. Total revenue came in line with the Zacks Consensus Estimate.
Premium revenues improved 8% year over year to $1.5 billion due to higher enrollment in Washington and Wisconsin and increased rates in Texas and Washington. Moreover, Molina’s service revenues increased to $49.7 million from $41.7 million in the year-ago quarter.
Additionally, rental income increased to $5.9 million in the quarter from $4.0 million in the year-ago quarter. Further, Molina’s investment income increased to $1.63 million from $1.06 million a year ago. Premium tax also increased to $46.9 million from $38.4 million in the second quarter of 2012.
Total expenses of Molina also increased 2% year over year to $1.56 billion. The increase was driven by general and administrative (G&A) expenses that escalated to $161.5 million from $125.8 million, cost of service revenues that increased to $39.3 million from $30.6 million, premium tax expenses that hiked to $46.9 million from $38.4 million in the prior-year quarter and depreciation and amortization (D&A) costs that increased to $17.0 million from $16.2 million. However, medical care costs declined to $1.29 billion from $1.32 billion in the prior-year quarter.
Additionally, Molina’s interest expense jumped to $11.7 million from $3.8 million in the year-ago quarter. Further, medical care ratio (ratio of medical care costs to premium revenue) improved to 86.2% from 94.5% in the year-ago quarter due to better operating performance in most health plans, particularly Texas.
Financial Update
Molina exited the second quarter with cash and cash equivalents of $742.7 million, down from $795.8 million at 2012 end. During the reported quarter, cash used in operations amounted to $129.2 million, compared with cash flow from operations of $185.4 million in the prior-year quarter.
At the end of Jun 2013, total assets increased to $2.58 billion from $1.93 billion at 2012 end. Meanwhile, Molina’s shareholder equity increased to $876.4 million from $782.3 million as of Dec 31, 2012.
Outlook for 2013
Molina expects operating earnings per share of $1.55 and net income of $1.72 per share in 2013.
Results at Other HMOs
Another health maintenance organization (HMO), WellPoint Inc. (WLP) reported second-quarter 2013 adjusted income of $2.60 per share, beating the Zacks Consensus Estimate of $2.08. Adjusted income also surpassed the year-ago earnings of $2.04 per share by 27.5%.
UnitedHealth Group Inc. (UNH) reported its second-quarter 2013 earnings of $1.40 per share, higher than the Zacks Consensus Estimate of 1.26 per share. Earnings were also up 7.4% on a year-over-year basis.
Other peers such as Humana Inc. (HUM) are expected to release their second-quarter earnings shortly.
Zacks Rank
Molina currently carries a Zacks Rank #2 (Buy).
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