Goldman Sachs Comments On Molina Healthcare Following Earnings Report; Raises PT

Molina Healthcare's MOH 4Q EPS was $0.58 versus Goldman Sachs $0.50 and Street consensus of $0.52. Following a strong close to 2010 and the company's reiteration of its 2011- 2012 outlook, Goldman maintains its 2011-2012 EPS of $2.23 and $2.60 and introduce 2013 EPS of $3.00. As with other managed care names this quarter, Molina showed strong underwriting earnings upside on continued soft healthcare volume trends with MCR of 82.7% 160 bp below Goldman's 84.3% estimate. This was partially offset by a jump in the SG&A expenses, driven partly by higher YoY incentive compensation but Goldman surmises that the company also accelerated spending into the earnings strength, which should be helpful for earnings this year. Molina is clearly well-positioned for significant growth opportunities as fiscally-pressed states push more Medicaid spending into managed care programs. With the additional backdrop of extraordinarily favorable trends last year, investor sentiment on Medicaid names is very bullish. Goldman Sachs has a $34 PT and Neutral rating on MOH MOH closed Thursday at $34.46