An acquisition and the start of a new health plan spurred managed-care provider Molina Healthcare (NYSE:MOH) to grow its Q4 revenues by 30% and confirm its guidance for FY 2007. The company also reported strong corresponding gains in earnings and membership enrollment. These results come in a week when Amerigroup (NYSE:AGP) and WellCare Health Plans (NYSE:WCG) also reported healthy increases in membership numbers.
Molina, which is based in Long Beach, Calif., and has been publicly traded since only 2003, announced an 8% increase in net income year over year and a 21% increase in total membership. Molina's acquisition of Cape Health Plan and a start-up plan in Ohio were major contributing factors to its growth. The company reported a slight increase in its medical care costs ratio, but the ratio would have remained constant, without the impact of its discontinued operations and start-up markets.
Molina's management remains proactive about expansion and is planning for more in 2007. The company's Medicare operations in Q4 2006 accounted for 2% of premium revenue. While this amount is relatively insignificant, the company had no Medicare operations in 2005, and entering this market in 2006 has given Molina an additional long-term growth opportunity. The company is also expecting strong gains from its start-up operations in Ohio this year. Since the end of the company's Q4 and through Feb. 1, membership in this segment grew by 63%.
While management said it regretted ending its operations in Indiana, I do not think shareholders will mind too much. EPS would have been about 6% higher for the company's full-year results had it not been for the losses incurred by this segment. Molina is continuing to focus on trimming its medical-care costs, which management has given more attention to in recent quarters. This has brought recent success in multiple markets, and should the company be able to rein in these costs further, expansion should be met with marked success.
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Fool contributor Billy Fisher does not own shares of any of the companies mentioned. The Motley Fool has a disclosure policy.
