LOS ANGELES (MarketWatch) — A massive growth in enrollment, thanks largely to the expansion of Medicaid programs under Obamacare, boosted the earnings of insurer Molina Healthcare well past analyst estimates and sent the company’s stock to an all-time high Tuesday.
Molina MOH, +3.77% shares spiked by more than 10% to $55.94 after the company reported late Monday that its adjusted fourth-quarter earnings were $1.24 a share, more than double the 56 cents expected from analysts polled by FactSet.
For the year, Molina’s membership jumped to more than 2.6 million, up from 1.9 million a year ago. The insurer specializing in low-income patients gained clients, thanks to increases from the South Carolina and Illinois health plans and the expansion of Medicaid in those states due to the Affordable Care Act. It also realized higher revenue from members receiving long-term services in California, Florida, Illinois, New Mexico and Ohio.
Another factor, Molina officials said, was greater efficiency. A total 89.5% of revenue was spent on health care; Obamacare requires that insurers devote only 80% of sales toward administering care. A year ago, that figure stood at 87.1%.
Administrative expenses were cut to 7.3% during the quarter, down from 11% for the same time frame in 2014.
Despite the substantial move by investors to drive up shares Tuesday, analysts weren’t as enthusiastic about the results — though they were encouraged. They noted that revenue fell slightly short of expectations, coming in at $2.8 billion instead of $2.86 billion, but that earnings might have calmed a jittery market.
“We see this a decent report, particularly given investor fears,” Leerink Research’s Ana Gupte said in a note to clients.
Chris Rigg of Susquehanna Financial Group noted that Molina is waiting to offer its 2015 forecast until it holds a meeting with investors on Thursday.
“The quarterly results suggest the company is making progress on several fronts, particularly as it relates to the ACA-fee in certain key states. Nevertheless, the more important event remains guidance later this week,” Rigg said.
Date: February 10, 2015