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Long Beach, California-based Molina Healthcare, Inc. (MOH) provides managed healthcare services to low-income families and individuals under the Medicaid and Medicare programs and through the state insurance marketplaces. Valued at a market cap of almost $16 billion, the company specializes in serving low-income, high-need populations, including those eligible for government-sponsored healthcare programs.
Shares of this healthcare company have massively underperformed the broader market over the past 52 weeks. MOH has declined 24.8% over this time frame, while the broader S&P 500 Index ($SPX) has soared 17%. Nonetheless, on a YTD basis, the stock is up 5.1%, outpacing SPX’s 1.3% rise.
Narrowing the focus, Molina has lagged behind the Health Care Select Sector SPDR Fund’s (XLV) marginal rise over the past 52 weeks and 8.2% return on a YTD basis.
On Feb. 5, MOH released its Q4 earnings, and its stock crashed 10.1% the following day after reporting adjusted EPS of $5.05, which missed Wall Street estimates by 13%. Despite this shortfall, the bottom line still showed 15.3% year-over-year growth. The earnings miss was primarily driven by a significant increase in medical care costs, lower investment income, and softer-than-expected membership growth. However, on a positive note, revenues rose 16% year-over-year to $10.5 billion, aligning with analyst expectations. Additionally, growing premiums and new contract wins helped offset some challenges.
For the current fiscal year, ending in December, analysts expect MOH’s EPS to grow 7.7% year over year to $24.40. The company’s earnings surprise history is mixed. It exceeded the Wall Street estimates in three of the last four quarters while missing on another occasion.
Among the 14 analysts covering the stock, the consensus rating is a “Moderate Buy,” which is based on five “Strong Buy,” eight “Hold,” and one “Moderate Sell” rating.
This configuration is slightly less bullish than three months ago, with six analysts suggesting a “Strong Buy” rating.
On Nov. 19, Wells Fargo maintained an “Equal-Weight” rating on Molina Healthcare but lowered its price target to $340, which indicates an 11.1% potential upside from the current levels.
The mean price target of $337.71 represents a 10.4% upside from MOH’s current price levels, while the Street-high price target of $384 suggests an upside potential of 25.5%.
