On May 9, 2013, shares of
Molina Healthcare Inc.
) reached a 52-week high of $35.98. The momentum was driven by
the company's strong earnings in the first quarter of 2013, which
included a 146.2% positive earnings surprise.
Molina reported first-quarter 2013 net earnings per share of
64 cents, significantly surpassing the Zacks Consensus Estimate
of 26 cents. Moreover, earnings per share increased from the
year-ago quarter number of 39 cents.
Total revenue for the reported quarter climbed to $1.59
billion from $1.37 billion in the prior-year quarter. Molina's
total revenue came in line with the Zacks Consensus Estimate.
Operating income and medical care ratio also improved. Molina
has maintained a strong track record of earnings, with positive
earnings surprise in 9 out of the last 10 quarters.
Going ahead, the uptrend in premium and service revenues along
with improving membership and operating cash flow are expected to
drive growth. Additionally, the strategy of expansion via
acquisitions is aiding the Medicaid health plan business.
However, the valuation of Molina looks stretched. The shares
are trading at a premium to its peers both on a price-to-book and
forward price-to-earnings basis, while the return on equity of
2.9% is lower than the peer group average of 9.7%. The year to
date return from the stock is 32.9%, much above S&P's return
Molina currently carries a Zacks Rank #2 (Buy). Other health
maintenance organizations worth considering are
Health Net Inc.
). All these companies carry a Zacks Rank #2 (Buy).
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