Molina Healthcare, Inc. (MOH) recently announced preliminary (unaudited) results for the fourth quarter as well as for fiscal 2009 (ended December 31). The company expects to suffer losses between 10 cents per share and 25 cents per share in the quarter, which is much worse than the Zacks Consensus Estimate of a 27-cent profit. Molina Healthcare now expects to earn between $1.12 and $1.26 in fiscal 2009. The Zacks Consensus Estimate is $1.65 per share.
The poor preliminary results are attributable to significant costs associated with the H1N1 flu. Molina Healthcare intends to announce complete results for the fourth quarter as well as fiscal 2009 on Feb 11, 2010.
Molina Healthcare believes that premium revenues for the quarter will come in at $962 million, thus reflecting an approximate 18% year-over-year increase. Furthermore, revenues for fiscal 2009 are expected to be $3.7 billion, up approximately 19%.
The drastic fall in earnings expectations despite the rise in revenues is primarily attributable to increased expected medical costs. The H1N1 influenza and the costs associated with recently enrolled members were the key contributors to the higher medical costs. The impact of the H1N1 flu epidemic is significant and has the potential of getting worse in the coming quarters.
Furthermore, we remain concerned about the competition that Molina Healthcare is facing. Consequently, we have an Underperform rating on the stock.
Molina Healthcare, 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).
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