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Molina shares jump after 3Q earnings report

Shares of Molina Healthcare Inc. soared Wednesday, a day after the Medicaid coverage provider reported third quarter earnings when Wall Street was expecting a loss.

THE SPARK: The Long Beach, Calif., company said Tuesday it earned $3.4 million, or 7 cents per share, in the three months that ended Sept. 30. Its total revenue jumped 31 percent to $1.54 billion.

Analysts expected, on average, a loss of 12 cents per share on $1.51 billion in revenue, according to FactSet.

THE BIG PICTURE: Molina administers Medicaid coverage, and the states it covers include California, Florida, Michigan, Ohio and Texas. The insurer serves about 1.8 million people.

Medicaid is the state and federally funded program that provides health coverage to poor and disabled people.

Molina said yesterday its third-quarter performance was helped by a big improvement in its Texas business compared to the second quarter, when the health plan spent more on claims than it collected in premiums in the state.

THE ANALYSIS: The company's Texas business showed "massive improvement" in one quarter and was the main reason Molina's earnings exceeded expectations, Stifel Nicolaus analyst Tom Carroll said in a research note.

Susquehanna Financial Group analyst Chris Rigg said in a separate note he now expects the company to post a 2012 loss of 4 cents per share, down from his previous forecast for a loss of 45 cents per share. Rigg said a rate hike, care management that aims to cut health care use and the loss of 11,000 high-cost members helped Molina improve in Texas.

SHARE ACTION: Up almost 11 percent, or $2.48, to $25.21 in afternoon trading, while broader indexes climbed less than 1 percent. Its shares are still down 32 percent from a 52-week high of $36.83 set in mid-February.

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