Molina Healthcare - $MOH - Earnings Analysis: Strong premium revenue growth driven by acquisitions and new contracts.

Business Model

Molina Healthcare generates revenue primarily through premiums from managed healthcare services under Medicaid and Medicare programs and through state insurance marketplaces.

Revenue Sources

• Premium revenue from Medicaid, Medicare, and Marketplace plans.
• Premium tax revenue.
• Investment income.
• Other revenue.

Income Statement Analysis

• Premium revenue increased by 19.39% in Q4 2024 compared to Q4 2023, driven by new contract wins, acquisitions, and organic growth.
• Medical care costs increased by 20.78% in Q4 2024 compared to Q4 2023, indicating higher healthcare utilization and costs.
• Net income increased by 16.2% in Q4 2024 compared to Q4 2023.
• Diluted EPS increased by 20% in Q4 2024 compared to Q4 2023.

Balance Sheet Analysis

• Total assets increased by 4.95% from December 31, 2023, to December 31, 2024, reflecting overall growth and acquisitions.
• Total stockholders' equity increased by 6.67% from December 31, 2023, to December 31, 2024, indicating improved financial health and profitability.
• Total liabilities increased by 4.28% from December 31, 2023, to December 31, 2024. It is calculated by subtracting Total assets from Total Stockholders equity.

Cash Flow Analysis

• Net cash provided by operating activities decreased significantly due to timing differences in government receivables and payables, especially risk corridor settlements and accruals.
• Net cash used in financing activities increased primarily due to common stock purchases.

Capital Allocation

Molina Healthcare allocates capital through acquisitions, share repurchases, and investments in organic growth. They repurchased approximately 1.7 million shares for $500 million in Q4 2024. They are focused on growing their Medicaid, Medicare, and Marketplace businesses through new contracts and strategic acquisitions like ConnectiCare. They also invest in new business implementation.

Management Commentary

I am very pleased our 2024 revenue growth exceeded our long-term targets and we produced consolidated pre-tax margins within our long-term target range

Our earnings growth profile is solid heading into 2025, and we continue to execute on the long-term growth opportunities within all of our businesses.

Our fourth quarter results and performance metrics did not meet our expectations, but we did demonstrate a continued ability to maintain operating discipline while navigating industry wide headwinds.

Overall Sentiment: The overall management sentiment is cautiously optimistic. They are pleased with revenue growth and long-term prospects but acknowledge challenges with medical costs in Q4. They are focused on executing their growth strategy and managing costs effectively.

Recommendation

Rating: Hold

Reason for Rating: Hold rating is recommended due to a mix of strong revenue growth and future opportunities balanced with concerns about elevated medical costs and near-term margin pressure.

Disclaimer: This analysis is based on company filings and public information. It is for informational purposes only and not financial advice. Past performance does not guarantee future results. Investing in securities involves risks, including potential loss of principal. Always conduct your own research, understand the risks, and consult a financial professional before making investment decisions.

Generated on: 2/8/2025, 1:26:22 PM