Why Molina Healthcare is a Good Investment Pick? - Analyst Blog


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On Jun 24, 2014, Zacks Investment Research upgraded Molina Healthcare Inc. ( MOH ) 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. ( WCG ) and Humana Inc. ( HUM ), 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 Care Act.

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, respectively.

Other Stocks to Consider

Other players in the healthcare services space that look attractive at current levels include WellCare and Centene Corp. ( CNC ). Both Centene and WellCare have a Zacks Rank #1 (Strong Buy).

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

HUMANA INC NEW (HUM): Free Stock Analysis Report

MOLINA HLTHCR (MOH): Free Stock Analysis Report

WELLCARE HEALTH (WCG): Free Stock Analysis Report

CENTENE CORP (CNC): Free Stock Analysis Report

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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Stocks
More Headlines for: HUM , MOH , WCG , CNC

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