In an effort to enhance its shareholder value, the board of
Molina Healthcare Inc.
) approved a new share buyback program worth $50 million,
effective from Sep 30, 2013 through Dec 31, 2013.
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On the back of this repurchase program, the share price of Molina
increased by nearly 1.1% to $36.71 per share on Oct 4, 2013 from
$36.32 recorded at the end of Oct 3, 2013.
Molina's new share buyback has replaced its prior buyback program
of $75 million, sanctioned in Feb 2013 and extended till Dec
2014. In the very first month of its approval, the company
repurchased $50 million worth of shares.
The company plans to fund the new repurchase with its available
cash balance. Molina's solid financials assist the company to
fund its buyback program. It exited the second quarter of 2013
with cash and cash equivalents of $742.7 million.
Share repurchases benefit the company's earnings per share, book
value as well as shareholder equity, as the buyback activity
lowers share count. Meanwhile, Molina continues to concentrate on
expanding its revenue and operating income, both of which gained
modest improvement during the second quarter of 2013.
However, no earnings momentum has been witnessed over the last 7
days. As a result, the Zacks Consensus Estimate for 2013 and 2014
remained intact at $1.62 and $1.28 per share, respectively.
Nevertheless, we expect that the news of the new buyback
authorization will encourage analysts to pull up their estimates,
providing upward pressure on the stock in the near term.
Molina Healthcare presently carries a Zacks Rank #3 (Neutral).
Among better-performing players in the insurance space,
Magellan Health Services Inc.
Health Net, Inc.
) carry a Zacks Rank #2 (Buy), and appear impressive.