Molina Healthcare, Inc. MOH is aided by a growing Medicaid and Medicare customer base, contract wins, acquisitions and a sound financial position.

Zacks Rank & Price Performance

Molina Healthcare currently carries a Zacks Rank #3 (Hold).

The stock has gained 1.9% in the past six months against the industry’s 0.4% decline.

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MOH’s Favorable Style Score

MOH is well-poised for progress, as evidenced by its impressive VGM Score of A. Here, V stands for Value, G for Growth and M for Momentum, and the score is a weighted combination of all three factors.

Robust Growth Prospects of MOH

The Zacks Consensus Estimate for 2025 earnings is pegged at $26.02 per share, indicating an improvement of 11% from the 2024 estimate. The consensus mark for revenues is pegged at $43.8 billion, indicating 7.9% growth from the 2024 estimate.

MOH’s Impressive Earnings Surprise History

MOH’s bottom line outpaced earnings estimates in each of the trailing four quarters, the average surprise being 2.42%.

Solid Return on Equity for MOH

The return on equity for Molina Healthcare is currently 27.9%, which is higher than the industry’s average of 23.7%. The figure substantiates the company’s efficiency in utilizing shareholders’ funds.

Molina Healthcare’s Key Business Tailwinds

Molina Healthcare's premium revenues have experienced significant growth, fueled by an expanding customer base and the strong performance of its Medicaid and Medicare businesses. In the first nine months of 2024, premium revenues increased 18.5% year over year. Management anticipates 2025 premium revenues to be greater than or equal to $41 billion. Long-term premium revenue growth is expected to be within 11-13%.

The company’s affordable health plans, which offer comprehensive benefits, have secured key contract wins, contributing to membership growth. In 2024, Molina Healthcare was awarded new Medicaid contracts in Florida and Michigan. It also received contracts from the state authorities of Michigan and Idaho last year to serve the dual eligible population. As of Sept. 30, 2024, Medicaid and Medicare membership grew 3.9% and 42.8% year over year, respectively.

The aging U.S. population, particularly within the medically vulnerable demographic, is expected to sustain high demand for Molina Healthcare’s Medicare plans, which cater to individuals aged 65 and older.

Over time, Molina Healthcare has enhanced its capabilities, diversified its revenue streams, and expanded its geographic footprint through strategic acquisitions. The buyout of Bright Healthcare’s California Medicare business remains notable for the health insurer last year. Additionally, in July 2024, Molina Healthcare signed a definitive agreement to purchase ConnectiCare Holding Company, a move that will strengthen its presence in Connecticut. 

Molina Healthcare’s solid financial position supports ongoing business investments. Strong cash reserves and adequate cash-generating abilities highlight its financial stability, with cash and cash equivalents amounting to $4.7 billion as of Sept. 30, 2024.

Risks

Despite the upside potential, there are a few factors that investors should keep an eye on.

MOH continues to witness an escalating expense level as a result of higher medical care costs, and general and administrative expenses. Higher expenses can put pressure on the company’s margins in the days ahead. 

Molina Healthcare's medical care ratio (MCR) continues to be on the rise. A higher MCR indicates a lower proportion of remaining premiums after the payment of insurance claims. In the first nine months of 2024, the MCR deteriorated by 180 basis points in the Medicaid business compared with the same period in 2023.

Stocks to Consider

Some better-ranked stocks in the Medical space are Halozyme Therapeutics, Inc. HALO, BioMarin Pharmaceutical Inc. BMRN and Enovis Corporation ENOV. While Halozyme Therapeutics currently sports a Zacks Rank #1 (Strong Buy), BioMarin Pharmaceutical and Enovis carry a Zacks Rank #2 (Buy) each. You can see the complete list of today’s Zacks #1 Rank stocks here.

Halozyme Therapeutics’ earnings surpassed estimates in three of the last four quarters and matched the mark once, the average surprise being 14.86%. The Zacks Consensus Estimate for HALO’s 2025 earnings indicates 18.3% growth from the 2024 estimate. The consensus mark for revenues implies an improvement of 16.4% from the 2024 estimate. The consensus mark for HALO’s earnings has moved 0.2% north in the past 30 days.

The bottom line of BioMarin Pharmaceutical beat estimates in each of the trailing four quarters, the average surprise being 28.70%. The Zacks Consensus Estimate for BMRN’s 2025 earnings indicates an improvement of 23.3% from the 2024 estimate. The consensus mark for revenues implies an improvement of 8% from the 2024 estimate. The consensus mark for BMRN’s earnings has moved 2.8% north in the past 30 days.

Enovis’ earnings outpaced estimates in three of the trailing four quarters and matched the mark once, the average surprise being 5.79%. The Zacks Consensus Estimate for ENOV’s 2025 earnings indicates an improvement of 14.3% from the 2024 estimate. The consensus mark for revenues implies 6.2% growth from the 2024 estimate. The consensus mark for ENOV’s earnings has moved 0.6% north in the past 30 days. 

Enovis stock has gained 2.1% in the past six months. However, shares of Halozyme Therapeutics and BioMarin Pharmaceutical have declined 3.9% and 17.3%, respectively, in the same time frame.

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