On Dec 31, Zacks Investment Research upgraded Molina Healthcare, Inc. (MOH) to a Zacks Rank #3 (Hold).
Why the Upgrade?
Molina Healthcare has witnessed a rising earnings estimate on the back of its solid results and efforts to enhance shareholder value.
The Zacks Consensus Estimate for 2014 increased 0.5% to $2.01 per share over the last 60 days.
Molina Healthcare delivered positive earnings surprise in the 3 of last 4 quarters with an average of 80.7%. In the last reported quarter, Molina Healthcare’s operating income of 31 cents per share surged nearly fourfold year–over–year.
Bottom-line growth came following an increase in total revenue and higher medical margins, which in turn was partially offset by greater administrative expenses. However, the higher expenses were incurred to drive substantial membership growth for the company.
Total revenue for Molina Healthcare during the last reported quarter climbed 9.5%, primarily attributable to higher premium revenues, which in turn increased due to higher enrollment as well as higher revenue per member per month. Also, higher premium tax receipt, service revenues and rental and other income drove revenue growth.
Molina Healthcare is also garnering investor confidence by enhancing shareholders’ value via share repurchase activities. In the fourth quarter of 2013, the board of directors approved a new share repurchase authorization of $50 million.
Molina expects to deliver operating earnings per share of $3.20 in 2013. The Zacks Consensus Estimate of $1.15 for 2013 lies much below the company’s guidance. Net income is expected to be $1.15 per share. Though it is revised downward, it incorporates costs to be incurred for continuous infrastructure build out, costs to implement enhanced care coordination and medical management, among others.
Nonetheless, Molina Healthcare expects its revenues to be doubled by 2015 as more number of lower-income people is now becoming eligible for healthcare coverage.
Other Stocks to Consider
Investors interested in the healthcare sector may consider stocks like Gentiva Health Services Inc. (GTIV), Addus HomeCare Corporation (ADUS) and Acadia Healthcare Company, Inc. (ACHC). While Gentiva and Addus HomeCare sport a Zacks Rank #1 (Strong Buy), Acadia Healthcare carries a Zacks Rank #2 (Buy).
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