Molina Guides for 2010 - Analyst Blog
Molina Healthcare Inc. (MOH) recently announced its guidance for fiscal 2010. The company expects to earn $1.50 per share corresponding to a net income of $39 million in 2010. The Zacks Consensus Estimate for 2010 is $1.68.
Molina forecasts 2010 investment income to be $9 million. Furthermore, the company predicts premium revenue of $3.9 billion for 2010. Medical care costs are expected to come in at 86% of premium revenue in 2010.Administrative expenses (inclusive of premium taxes) are expected to come at 11% of total revenue.
The forecast for 2010 excludes the dilutive impact expected in fiscal 2010 from Molina’s acquisition of information technology (IT) company Unisys Corp.'s (UIS) health information management (HIM) business for $135 million in cash. The transaction is expected to close in the first half of 2010.
We have an Underperform rating on Molina primarily because of the company’s below-par performance in the third-quarter of fiscal 2009. Molina recently came up with poor preliminary results for fourth quarter as well as fiscal 2009 (ended December 31). Molina Healthcare intends to announce complete results for the fourth quarter as well as fiscal 2009 on Feb 11, 2010.
The company reported a 45% decline in earnings for the third quarter of 2009. The decline was mainly attributable to the higher operating expenses which recorded a 17.5% increase. The primary component of operating expenses i.e. medical cost increased 18.4% in the quarter.
The H1N1 influenza and costs associated with recently enrolled members were the key contributors to the higher medical costs. The impact of the H1N1 flu epidemic is significant and has the potential to worsen in the coming quarters. We are also concerned about the intense competition facing Molina. Molina competes with players such as Centene Corp. (CNC) and WellPoint Inc. (WLP).
Read the full analyst report on "MOH"
Read the full analyst report on "CNC"
Read the full analyst report on "WLP"
Read the full analyst report on "UIS"
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