Yesterday, Molina Healthcare Inc. (MOH) provided its financial guidance for 2012, estimating operating earnings of $1.80 per share. This is marginally ahead of the Zacks Consensus Estimate of $1.75 per share.
For 2012, Molina’s earnings before interest, taxes, depreciation and amortization (EBITDA) are expected to be about $220 million, while income before tax is predicted to be $137 million. As a result, net income is projected to be $85 million. Meanwhile, total revenue is anticipated to be around $6.1 billion, substantially above the Zacks Consensus Estimate of $5.4 billion.
Total revenue comprises premium revenue, service revenue and investment income, which are predicted to be $5.9 billion, $185 million and $6 million, respectively, in 2012.
On the expense side, medical care costs are expected to be approximately $5.1 billion. Meanwhile, service costs are projected to be $158 million and general and administrative (G&A) expenses are anticipated to be $476 million.
Additionally, Molina projects depreciation and amortization to be about $35 million and $17 million, respectively, while it anticipates interest expense to be $17 million. Furthermore, the company estimates premium tax expense to be $169 million along with an effective tax rate of 38%.
In terms of ratios, Molina expects medical care ratio (ratio of medical care costs to premium revenue) to be 86% in 2012. Additionally, service revenue ratio is projected to be 85% and G&A ratio is projected to be 7.8%.
Outstanding shares are expected to increase to 47.3 million at 2012-end from 45.7 million as of October 21, 2011, hinting at the possibility of stock issue or another stock split, subsequent to the split in May 2011.
Meanwhile, the Zacks Consensus Estimate for Molina’s fourth-quarter 2011 earnings stands at 39 cents per share. Out of the 12 analysts covering the stock, only one revised the estimate downward, while no upward revisions were witnessed in the past 30 days. For 2011, earnings are expected to be $1.55 per share, up 1.5% from 2010.
Out of 13 analysts, only one revised Molina’s 2012 estimate downward in the past 30 days, while one upward revision was witnessed. However, more revisions are expected as the analysts factor in the company’s guidance.
Molina’s peers WellPoint Inc. (WLP) and UnitedHealth Group Inc. (UNH) recently announced their fourth quarter results. WellPoint reported fourth-quarter 2011 adjusted income of 99 cents per share, lagging the Zacks Consensus Estimate of $1.11 per share.
However, UnitedHealthdeclared fourth-quarter 2011 earnings of $1.17 per share, outpacing the Zacks Consensus Estimate of $1.02.
Molina currently retains a Zacks #3 Rank, implying a short-term Hold rating. Considering the fundamentals, we maintain our long-term Neutral recommendation on the stock.
