Molina Healthcare (MOH) up 14.4% in 6 months: growth in sight?
Molina Healthcare, Inc.Department of Health shares have jumped 14.4% in the past six months, beating the industry’s 11.6% increase, on the back of rising memberships and rising premium income . The company has benefited from the ongoing economic recovery, which is leading to an increase in registrations.
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Based in Long Beach, Calif., Molina Healthcare is a multi-state managed care provider participating exclusively in government-sponsored healthcare programs, such as the Medicaid program and the Children’s Health Insurance program. State, aimed at low-income people. It has a market cap of $16.7 billion.
Can he keep his momentum going?
The answer is yes and before we get into the details, let us show you how his estimates for the year 2021 stack up. Zacks consensus estimate for Molina Healthcare’s earnings in 2021 is pegged at 13.37 $ per share, indicating a 25.3% increase from $10.67 a year ago. The company has exceeded earnings estimates twice in the past four quarters and missed the other two occasions, averaging 4%. The consensus revenue estimate for 2021 is $27.5 billion, signaling a 41.7% year-over-year increase.
Now let’s take a look at what is driving the Zacks Rank #2 (Buy) stock.
The overall health insurance industry is benefiting from increased enrollments, product changes, improved services and cost management, better claims management, technology upgrades, and more. . The industry is expected to maintain momentum in 2022. Government support is expected to play a crucial role in the future. As such, the MOH should follow the growing trends.
Molina Healthcare benefited from the restructuring and profitability improvement plan that began in 2017. The plan included streamlining the organizational structure to improve efficiency, speed and quality of decision-making. This initiative resulted in a decrease in total expenditure of 13.2% and 11% in 2018 and 2019, respectively. Prudent cost management efforts and good business scalability resulted in a lower adjusted G&A ratio in 2020. Although it increased in the first nine months of 2021, we expect the company help to reduce costs in the future and increase profits.
The company’s premium income for the third quarter increased 43% year-over-year driven by the positive effect of acquisitions and organic memberships.
Molina Healthcare’s focus on strategic acquisitions to boost its business bodes well. The company completed the takeover of the Magellan Complete Care line of businesses, which has attracted more than 3.6 million members through government-sponsored healthcare programs in 18 states. It acquired Affinity Health Plan last October, which recruited 310,000 members. Earlier this year, Molina Healthcare completed the acquisition of the Texas Medicaid and Medicare-Medicaid Plan contracts as well as specific operating assets from Cigna Corporation THIS. It expects to earn $1 billion in new annual revenue with the assets acquired from Cigna.
Molina Healthcare also closed other takeovers such as YourCare and Passport, resulting in increased memberships. Molina Healthcare also purchased AgeWell’s managed long-term care business in New York. He also expects the same to produce a 15 to 20 cent increase in the first year of ownership.
The company’s ability to generate cash from its operations is also impressive. In fact, over the past 12 months, its free cash flow has increased by 51.7% to $2,755 million compared to the corresponding period of the previous year. This reflects the operational power of the Ministry of Health.
Despite the upside potential, a few factors are holding back the stock’s growth. Its fragile balance sheet and solvency position are major headwinds. Nevertheless, we believe that a systematic and strategic action plan will stimulate long-term growth.
Other Key Choices
Other top-ranked stocks in the medical field include Globus Medical, Inc. GMED and Apyx Medical Corporation APYX, each wearing a Zacks rank #2. You can see the full list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Globus Medical develops healthcare solutions for patients with musculoskeletal disorders. GMED also provides products for orthopedic trauma treatment. The medical device company’s net income for 2021 is expected to jump 40.3% from the previous year’s figure. Globus Medical, based in Audubon, Pa., has witnessed an upward revision in estimates over the past 60 days and no movement in the opposite direction. Globus Medical has exceeded earnings estimates in each of the past four quarters, averaging 21.4%.
Apyx Medical is a manufacturer of medical devices for cosmetic and surgical markets worldwide. Based in Clearwater, Fla., APYX’s 2021 net income is expected to grow 17.5% year-over-year. It has seen an upward revision in estimates over the past 60 days and no movement in the opposite direction. Apyx Medical has beaten earnings estimates three times in the past four quarters and met once, with the average surprise being 25.9%.
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