Molina Healthcare (MOH) up 32% in one year: is there more upside?

Shares of Molina Healthcare, Inc. The Department of Health gained 32% in one year, outpacing the industry’s 31.3% increase and the medical sector’s 20.1% decline. The S&P 500 composite index rose 6.2% over the same period. With a market capitalization of $18.6 billion, the average volume of shares traded over the past three months was 0.6 million.

Solid membership growth, an impressive acquisition history, a strong Medicaid business in place coupled with a healthy financial position continue to drive Molina Healthcare’s performance. A bullish stance for 2022 could act as a tailwind for the stock.

This Zacks No. 3 (Hold) ranked healthcare service provider has exceeded estimates in three of the past four quarters.

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Can the Ministry of Health keep up the momentum?

The Zacks consensus estimate for Molina Healthcare’s earnings in 2022 is pegged at $17.27, indicating a 27.6% increase over the prior year’s figure on revenue up 7, 7% of $29.9 billion. The consensus earnings estimate for 2023 is $19.57, suggesting 13.3% growth from the figure reported a year ago on a 5.6% revenue increase of 31, $6 billion.

The Zacks consensus estimate for MOH earnings in 2022 has risen 0.9% over the past 30 days, reflecting analyst optimism. The expected long-term earnings growth rate is pegged at 18.8%, better than the industry average of 14.5%.

Molina Healthcare’s revenues continue to benefit from higher premium income resulting from strong enrollment growth in its Medicaid, Medicare and Marketplace segments. The Department of Health has strong Medicaid activity, which continues to benefit from factors such as increased enrollment and contract wins similar to those in Nevada and Ohio. In fact, total Medicaid premium revenue accounted for about 74% of Molina Healthcare’s revenue last year. As of December 31, 2021, MOH Medicaid enrollment has grown 20.3% over the comparable period of the prior year. The company completed the buyout of Cigna’s Texas Medicaid contracts in early 2022 in a bid to grow its Medicaid business.

A bullish outlook for 2022 also makes the MOH an investor favourite. Revenue is forecast at approximately $29.5 billion, indicating an increase of approximately 6% over the reported 2021 figure. An increase in premium revenue is also expected to match the estimated revenue growth for 2022. The adjusted earnings per share should be at least $17, representing 26% year-over-year growth.

Molina Healthcare has a solid track record of accretive acquisitions. The announcement of 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, generated an EPS impact of more than 3, $00 per share for the MOH. It uses prudent expense management programs, boosting its margins.

The Ministry of Health is backed by a strong financial position with a growing cash balance and strong cash generation capabilities. The healthcare provider ended 2021 with 6.8% year-over-year growth in cash and cash equivalents. Molina Healthcare generated operating cash worth $2.1 billion in 2021. Meanwhile, the MOH boasts of adequate free cash flow, which the company can deploy to pursue a strong pipeline of opportunities in the days to come.

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

Actions to consider

Some top ranked actions in the medical field are Applied Therapeutics, Inc. LTPA, Catalyst Pharmaceuticals, Inc. CPRX and IDEXX Laboratories, Inc. IDXX, each carrying a Zacks Rank #2 (Buy) at present. You can see the full list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Applied Therapeutics posted a four-quarter earnings surprise of 2.58% on average. Zacks consensus estimate for APLT revenue in 2022 suggests a 9% improvement from the figure reported a year ago. The consensus mark for 2022 earnings has moved north 2.6% in the past 30 days. Applied Therapeutics has a Momentum score of B.

Catalyst Pharmaceuticals’ net income has exceeded earnings estimates in three of the last four quarters and met once, with the average surprise being 30.56%. The Zacks consensus estimate for CPRX revenue in 2022 has moved north 2.6% over the past 60 days. Catalyst Pharmaceuticals has a VGM score of B.

IDEXX Laboratories has exceeded earnings estimates in each of the past four quarters, with the average surprise being 18.55%. The Zacks consensus estimate for IDXX earnings in 2022 points to a 9.9% year-over-year increase, while the same for revenue suggests a 10.3% improvement. The consensus mark has moved north 1.1% over the past 60 days. IDEXX Laboratories has a growth score of B.

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

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