Bloomberg News

Molina Jumps as Texas Health Plan Rebounds: Los Angeles Mover

October 24, 2012

Molina Healthcare Inc. (MOH:US), the insurer specializing in Medicaid plans for the poor, jumped the most in almost four months in New York trading after reporting a profit on improved results from its biggest market.

The insurer rose 14 percent to $25.81 at the close of trading, for its biggest one-day gain since July 9. The Long Beach, California-based administrator of coverage for Medicaid, the government-funded program for low-income patients, yesterday said it had third-quarter net income (MOH:US) of 7 cents a share after a “rapid turnaround” in Texas.

The net income contrasts with results of the second quarter, when high medical costs in Texas, which generates about a fourth of Molina’s revenue, led to a net loss of 80 cents a share and the withdrawal of the company’s full-year forecast. A rate increase and reduced costs in Texas helped fuel the rebound, said Scott Fidel, a Deutsche Bank AG analyst in New York, in a note to clients today.

The Texas result “shows sharp improvement in the third quarter, which puts Molina firmly on track to return to profitability here in the fourth quarter,” Fidel wrote. The improvement outweighed a rise in medical costs in California, the company’s fourth-largest market, he said.

The California figures may be a warning sign for earnings at Health Net Inc. (HNT:US), the Woodland Hills, California-based insurer that partners with Molina in that state, Fidel wrote. Health Net collects a fifth of its insurance premiums from California Medicaid contracts, he said. Its shares fell 4 percent to $21.26.

Health Net is scheduled to report third-quarter earnings on Nov. 5.

To contact the reporter on this story: Alex Nussbaum in New York at anussbaum1@bloomberg.net

To contact the editor responsible for this story: Reg Gale at rgale5@bloomberg.net


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Companies Mentioned

  • MOH
    (Molina Healthcare Inc)
    • $45.54 USD
    • -0.48
    • -1.05%
  • HNT
    (Health Net Inc/CA)
    • $42.9 USD
    • 0.02
    • 0.05%
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