Why Molina Healthcare Shares Got Crushed

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Molina Healthcare (NYSE: MOH  ) plummeted 30% on Thursday after the health insurer pulled its 2012 profit outlook due to medical cost uncertainties in Texas.

So what: Molina has been expanding rapidly its Texas, but higher-than-expected member claims from Hidalgo and El Paso are triggering serious concerns about its profitability going forward. Naturally, the fears are carrying over to other health insurers with exposure to those markets, as the likes of Centene (NYSE: CNC  ) and Amerigroup are down 13% and 4%, respectively.

Now what: To rectify the situation, Molina plans to set new premium rates on September 1 and control costs as best as it can, as well as asking the state of Texas for some relief in its rate-setting assumptions. Of course, if management can't turn things around in Hidalgo and El Paso, Molina can simply choose to leave those margin-squeezing markets. So while the Texas trouble will certainly put pressure on Molina in the short-term, it's likely not as devastating to the long-term bull case as today's sell-off suggests.

Interested in more info on Molina? Add it to your watchlist.

Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Try any of our Foolish newsletter services free for 30 days.

We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy always gets a perfect score.

Read/Post Comments (0) | Recommend This Article (4)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1906047, ~/Articles/ArticleHandler.aspx, 10/23/2016 2:16:11 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 1 day ago Sponsored by:
DOW 18,145.71 -16.64 -0.09%
S&P 500 2,141.16 -0.18 -0.01%
NASD 5,257.40 15.57 0.30%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/21/2016 4:02 PM
MOH $59.50 Up +1.26 +2.16%
Molina Healthcare CAPS Rating: ****