Please ensure Javascript is enabled for purposes of website accessibility

Why Molina Healthcare, Inc. Rose as Much as 18.5% Today

By Maxx Chatsko - Aug 1, 2018 at 1:48PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The managed care organization reported second-quarter 2018 earnings.

What happened

Shares of Molina Healthcare (MOH 2.60%) rose over 18% today after the company reported second-quarter 2018 results. The managed care leader delivered another solid quarter of operations as it continued to slim down, improve efficiency, and reduce debt. While revenue fell 2.5% compared to the year-ago period, net income jumped to $202 million, compared to a year-ago net loss of $230 million. Total debt has declined by $493 million since the beginning of the year. 

Solid progress in the first half of 2018 prompted management to raise its full-year 2018 guidance for the second straight quarter. "Raising guidance" might be an understatement. Molina Healthcare now expects approximately $477 million in net income at the midpoint. Original guidance called for just $219 million in net income for all of 2018 -- a number nearly surpassed in the most recent quarter.

As of 12:53 p.m. EDT, the stock had settled to a 17.3% gain.

A woman checking her phone and pumping her fist as money falls around her.

Image source: Getty Images.

So what

The incredible leap observed in full-year 2018 earnings guidance is being driven by sharp improvements in membership for both the marketplace and non-marketplace (Medicaid and Medicare) businesses and decreased cost ratios for each. Consider several selected highlights from Molina Healthcare's original guidance and the most recent expectations provided: 


Original Guidance (February)

Current Guidance (July)

Total revenue

$18.8 billion

$18.8 billion

Medical care costs

$15.6 billion

$15.2 billion

Net income

$219 million (midpoint)

$477.5 million (midpoint)


$654 million (midpoint)

$976.5 million (midpoint)

End-of-year membership, marketplace



End-of-year membership, non-marketplace



Source: Company press release.

Considering the business brings in nearly $19 billion in revenue per year, even small changes of a few percentage points can have huge effects on the bottom line. That's what investors are seeing play out when comparing the original guidance to the latest expectations.

Now what

Molina Healthcare's strategy to revamp the business and navigate the uncertainties facing the managed care industry has proven remarkably effective so far. Judging from the more than doubling of earnings guidance for full-year 2018, even management seems to be surprised at the company's good fortune. If the company can continue to boost profits, divest noncore assets, and pay down debt, then it should be able to continue rewarding shareholders for the long haul.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Molina Healthcare, Inc. Stock Quote
Molina Healthcare, Inc.
$303.58 (2.60%) $7.69

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/16/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.