Molina Healthcare Inc. (MOH) failed to meet its fourth-quarter 2013 guidance by reporting an operating loss per share of 3 cents, wider than the Zacks Consensus Estimate loss of 1 cent. While reporting its third-quarter 2013 results, Molina had stated that it expects break-even results in the fourth quarter. This loss per share also compares unfavorably with the year-ago quarter’s earnings of 65 cents per share.
Including amortization of convertible senior notes and lease financing obligations, and amortization of intangible assets, net loss for the quarter came in at 20 cents per share compared with a net income of 54 cents per share in the prior-year quarter.
Total revenue for Molina in the reported quarter climbed 8.1% to $1.71 billion from $1.58 billion in the prior-year quarter. However, total revenue missed the Zacks Consensus Estimate of $1.78 billion.
Premium revenues improved 8% year over year to $1.6 billion. Moreover, Molina’s service revenues decreased 2.4% to $54 million from $55.4 million in the year-ago quarter.
Additionally, rental and other income increased to $9.8 million in the quarter from $5.99 million in the year-ago quarter. Further, Molina’s investment income increased to $2 million from $1.2 million a year ago. Premium tax receipts also increased to $44.4 million from $38.0 million in the fourth quarter of 2012.
Total expenses rose 11.9% year over year to $1.7 billion. The rise was driven by general and administrative (G&A) expenses that escalated to $187 million from $153.1 million in the prior-year quarter, premium tax expenses that hiked to $44.4 million from $38 million, depreciation and amortization (D&A) costs that increased to $20.3 million from $16.2 million, and medical care costs that expanded to $1.4 billion from $1.3 billion.
Operating loss was $2.7 million in the reported quarter that compared unfavorably with operating income of $51.8 million in the year-earlier quarter.
Additionally, Molina’s interest expenses jumped to $13.8 million from $4.3 million in the year-ago quarter. Further, medical care ratio (ratio of medical care costs to premium revenue) deteriorated 230 basis points to 88.7% from 86.4% in the year-ago quarter.
Full-Year Highlights
Molina reported full-year 2013 operating earnings per share of $1.63 that surpassed the Zacks Consensus Estimate of $1.13 per share. Results also improved significantly over the year-ago earnings of 66 cents per share.
Including amortization of convertible senior notes and lease financing obligations, and amortization of intangible assets net income for full-year 2013 came in at 96 cents per share compared to net income of 27 cents per share in the prior-year quarter.
Total revenue for 2013 surged to $6.6 billion from $5.9 billion in the prior-year quarter. The company’s foray into Illinois and South Carolina contributed positively to the improvement. Expansion in Ohio and obtaining the long-term care contract in Florida and five dual-eligible contracts also drove revenues for full-year 2013.
Financial Update
As of Dec 31, 2013, cash and cash equivalents at Molina were $935.9 million, up from $795.8 million at 2012-end. During the year, cash from operations amounted to $190.1 million as against $347.8 million in 2012.
As of Dec 31, 2013, total assets increased to $3 billion from $1.93 billion at 2012-end. Meanwhile, Molina’s shareholder equity stood at $892.9 million as of Dec 31, 2013 compared with $782.3 million as of Dec 31, 2012.
Our Take
Although Molina’s fourth-quarter results were disappointing, the company came up with strong numbers for full-year 2013. Business expansions and growth in the existing health plans contributed significantly to the full-year improvement.
Although premium rates pressure, higher expenditure for new enrollment on administration and postponement in certain programs were some headwinds, Molina succeeded to enhance overall company enrollment in 2013. The company’s efforts to stabilize medical costs led to medical margin expansion during the year. However, rise in general and administrative expenses was a partial setback.
Others
Aetna Inc. (AET) reported fourth-quarter 2013 earnings of $1.34 per share, missing the Zacks Consensus Estimate by a penny.
Humana Inc.’s (HUM) fourth-quarter 2013 operating loss came in at 19 cents per share. The results substantially lagged the Zacks Consensus Estimate of earnings of 93 cents.
WellPoint Inc. (WLP) reported fourth-quarter 2013 adjusted income of 87 cents per share, beating the Zacks Consensus Estimate by a penny.
Zacks Rank
Molina currently carries a Zacks Rank #3 (Hold).
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