On Jun 24, 2014, Zacks Investment Research upgraded
Molina Healthcare Inc.
) to a Zacks Rank #2 (Buy).
Why the Upgrade?
Molina Healthcare has been witnessing rising earnings estimates on
the back of strong first-quarter 2014 earnings, focus on
technological enhancement and improvement of staff. The
year-to-date return from the sock was 28.14%, way above the S&P
500's return of 5.88% and that of others in the industry like
WellCare Health Plans Inc.
), which generated returns of 7.00% and 23.80% over the same
period. The long-term expected earnings growth rate for this
well-known healthcare service provider is 23.10%.
Molina Healthcare reported first-quarter earnings on May 2.
Operating earnings per share came in at 10 cents per share that
surpassed the Zacks Consensus Estimate significantly. Additionally,
the top line improved, based on rise in premiums and service
revenues, health insurer fee revenues and investment income.
Management also reiterated its 2014 net operating income guidance
at $1.65-$2.15 per share. This projection represents year-over-year
growth of 1.2%-32%.
Moreover, the company's financial position remains strong, which we
expect should help Molina Healthcare to undertake efficient capital
deployment strategies or inorganic growth initiatives.
Molina Healthcare forayed into South Carolina and started serving
members under the Medicaid managed care program of the state
effective Jan 2014. The company's initiatives toward enhancing its
staffing and technology are commendable as well. These initiatives
are expected to help Molina Healthcare capitalize on the growth
opportunities provided by the dual eligible programs and Affordable
The Zacks Consensus Estimate for 2014 increased nearly 4.1% to
$2.05 per share as most of the estimates were revised higher over
the last 60 days. For 2015 too, most of the estimates were revised
upward over the same time frame, lifting the Zacks Consensus
Estimate by 3% to $2.73 per share. These translate into a
year-over-year improvement of 25.61% and 33.21% for 2014 and 2015,
Other Stocks to Consider
Other players in the healthcare services space that look attractive
at current levels include WellCare and
). Both Centene and WellCare have a Zacks Rank #1 (Strong Buy).
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