Molina Healthcare, Inc (MOH) Earnings & Analysis

Latest quarter

Molina Healthcare reported third-quarter revenue of $11.1 billion, above the $10.9 billion consensus. Adjusted earnings per share were $0.89, compared with the $0.72 consensus.

Revenue declined from $11.5 billion a year earlier, while diluted earnings per share fell to $0.73 from $1.51. Molina’s gross margin narrowed to 12.3% from 12.5%, and its operating margin declined to 0.96% from 1.19%.

CEO Joseph Zubretsky said Medicaid rate updates largely offset a slight increase in medical costs during the quarter. CFO Mark Keim said Medicaid membership had declined year to date, while cost trends in long-term services and supports and behavioral health remained elevated but stable. Keim also said outpatient and high-cost drug trends were slightly higher.

Molina reported free cash flow of −$196.0 million, compared with −$163.0 million a year earlier. Keim said the parent company ended the quarter with approximately $600.0 million in cash after receiving $185.0 million in dividends from subsidiaries during the quarter.

Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.

What management said on the call

CEO Joseph Zubretsky said third-quarter Medicaid results were in line with expectations as rate updates largely offset a slight increase in medical costs. CFO Mark Keim said year-to-date Medicaid membership was down about 4.5%, consistent with Molina’s expectation of a 6% decline for 2026 before adding Florida CMS members. Keim said long-term services and supports and behavioral health cost trends remained elevated but stable, while outpatient and high-cost drug trends were slightly higher.

Zubretsky said Medicare results were in line with expectations and that the duals business, which serves people eligible for Medicare and Medicaid, had performed well. He said Marketplace results also met expectations, with no material impact from federal program integrity initiatives.

On the Florida CMS children’s health contract, Zubretsky said Molina had taken on 115,000 members at a $6 billion annual revenue run rate. Asked about the contract’s path to profitability, Keim said fourth-quarter guidance included a 5% pretax loss, including one-time reserves, and he expected improvements in medical costs and administrative expenses to bring it to break-even or better next year.

Analysts also asked about work requirements and eligibility reviews. Zubretsky said states were leaning toward policies that promote enrollment, but Molina was still projecting a 6% membership loss in 2027. Keim said Nebraska reported that 90% of renewing members were re-enrolled and added that Molina would update its guidance in February.

On Medicaid rates, Zubretsky said draft rates known for the January renewal cohort averaged approximately 7%. He said those rates reflected newer claims data and anticipated changes in members’ health needs. Asked about next year’s medical cost trend, he said the preliminary range included 50 basis points of conservatism and that Molina would refine its estimate in February.

Guidance

Zubretsky said Molina raised its 2026 Medicaid rate increase outlook from 4% to 4.5% and its medical cost trend outlook from 5% to 5.5%. He attributed the changes to rate updates and slightly elevated utilization, respectively.

For 2027, Keim said Molina now expects at least $45 billion in premium revenue, down from its prior outlook of $46.5 billion because of delays to the Georgia and Texas Star CHIP contracts. He said Molina now expects to realize $4 per share of embedded earnings in 2027, 50 cents less than previously estimated because of the potential timing of operating leverage from those contracts.