Recently, we upgraded Molina Healthcare Inc. (MOH) to Outperform from Neutral primarily driven by the strong performance of the company in the first quarter of 2010. Our price target is $35.
Molina Healthcare’s first quarter 2010 earnings of 41 cents per share handsomely beat the Zacks Consensus Estimate of 18 cents. The better-than-expected results in the quarter were driven by higher operating revenues coupled with lower medical care costs on a per-member per-month (PMPM) basis on account of a mild flu season. Furthermore, there was an approximately 14% year-over-year rise in enrollment in the quarter.
The continued increase in premium revenues is a positive feature for Molina. Premium revenues are paid to the company’s health plans by the relevant state Medicaid authority. This accounts for almost all the revenues generated by the company. Premium revenues in the first quarter of 2010 climbed 12.6% year-over-year to $965.2 million.
Molina is expanding its geographic reach via acquisitions and adding to the consolidation of the industry. The company has increased its membership through the development of new health plan operations, the acquisition of existing health plans, and internal growth. Molina currently serves approximately 1.50 million members.
Recently, Molina acquired information technology company Unisys Corp.’s (UIS) health information management (HIM) business for $135 million in cash. The acquisition is a positive for Molina as the HIM business adds value to its Medicaid health plan business. The acquisition expands Molina’s services and product offerings beyond managed care. The acquired division will operate as a subsidiary of Molina Healthcare under the name Molina Medicaid Solutions.
Molina, headquartered in Long Beach, California, is a multi-state managed care organization participating exclusively in government-sponsored health care programs catering to low-income persons, such as the Medicaid program and the Children’s Health Insurance Program (CHIP).
The Medicaid program provides health care benefits to low-income families and individuals. CHIP is a joint federal and state program providing health care coverage for children belonging to families earning more than the baseline required for Medicaid coverage, but not enough to afford commercial health insurance. States have the option of administering CHIP through their Medicaid programs.
Read the full analyst report on “MOH”
Read the full analyst report on “UIS”
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