What Happened?
Shares of healthcare insurance company Molina Healthcare (NYSE: MOH) fell 14.4% in the afternoon session after the company reported second-quarter earnings that missed analyst expectations and lowered its full-year financial guidance due to rising medical costs. The health insurer's adjusted earnings per share of $5.48 fell short of the $5.62 analyst estimate, driven by margin pressure from higher-than-expected medical expenses. The company's Medical Care Ratio (MCR), which measures how much premium revenue is spent on medical care, increased to 90.4% from 88.6% in the prior year. Consequently, Molina revised its full-year 2025 adjusted earnings guidance to be no less than $19.00 per diluted share, a reduction from a previously lowered target. The company cited a “challenging medical cost trend environment” for the results, which also included a negative operating cash flow of $112 million for the first half of the year.
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What Is The Market Telling Us
Molina Healthcare’s shares are quite volatile and have had 19 moves greater than 5% over the last year. But moves this big are rare even for Molina Healthcare and indicate this news significantly impacted the market’s perception of the business.
The previous big move we wrote about was 3 days ago when the stock dropped 3.8% on the news that TD Cowen lowered its price target on the stock to $283 from $369, citing elevated medical costs. The new price target came after Molina pre-announced its second-quarter 2025 earnings, which showed that higher-than-expected medical utilization is affecting all three of its business lines and is expected to persist for the rest of the year. As a result, TD Cowen reduced its full-year 2025 earnings per share (EPS) forecast for Molina to $21.68 from $24.45.
A key metric of concern is the medical loss ratio (MLR), which is the percentage of premiums an insurer spends on healthcare claims. A higher MLR indicates lower profitability. TD Cowen raised its estimate for Molina's consolidated MLR to 89.5%. Other analyst firms, including UBS and Barclays, also recently lowered their price targets on Molina due to the ongoing cost pressures.
Molina Healthcare is down 42.1% since the beginning of the year, and at $166.26 per share, it is trading 53.9% below its 52-week high of $360.77 from September 2024. Investors who bought $1,000 worth of Molina Healthcare’s shares 5 years ago would now be looking at an investment worth $902.36.
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