Molina Healthcare's third quarter was marked by strong revenue growth but a significant shortfall in profitability, leading to a pronounced negative market reaction. Management attributed the underperformance primarily to elevated medical cost trends, particularly within its Marketplace segment, which experienced higher-than-expected utilization across most cost categories. CEO Joseph Zubretsky acknowledged the challenging environment, pointing specifically to persistent cost pressures in behavioral health, pharmacy, and long-term services and supports. He noted, “Our consolidated medical cost ratio reflects the continuation of a very challenging medical cost environment in the third quarter.”
Is now the time to buy MOH? Find out in our full research report (it’s free for active Edge members).
Molina Healthcare (MOH) Q3 CY2025 Highlights:
- Revenue: $11.48 billion vs analyst estimates of $10.96 billion (11% year-on-year growth, 4.7% beat)
- Adjusted EPS: $1.84 vs analyst expectations of $3.89 (52.7% miss)
- Adjusted EBITDA: $185 million vs analyst estimates of $346.7 million (1.6% margin, 46.6% miss)
- The company lifted its revenue guidance for the full year to $44.5 billion at the midpoint from $44 billion, a 1.1% increase
- Management lowered its full-year Adjusted EPS guidance to $14 at the midpoint, a 26.3% decrease
- Operating Margin: 1.2%, down from 4.5% in the same quarter last year
- Customers: 5.63 million, down from 5.75 million in the previous quarter
- Market Capitalization: $8.37 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Molina Healthcare’s Q3 Earnings Call
- Andrew Mok (Barclays) asked about the drivers of ACA Marketplace cost ratio pressure and the impact of recent utilization spikes. CEO Joseph Zubretsky pointed to special enrollment members and broad-based cost trends, saying risk adjustment was not a material offset this year.
- Stephen Baxter (Wells Fargo) sought clarification on whether Medicaid rates would outpace medical cost trends and how enrollment is expected to evolve. Zubretsky responded that early 2026 rate outlooks are “slightly ahead of trend,” but acknowledged ongoing enrollment declines due to stricter state eligibility processes.
- A.J. Rice (UBS) inquired about the assumptions underlying Marketplace profitability for 2026, given subsidy uncertainties. CFO Mark Keim indicated that pricing assumes the expiration of enhanced subsidies and targets breakeven margins at reduced volumes, with adjustments possible if policy changes.
- Kevin Fischbeck (Bank of America) pressed on downside risks and the timing for realizing embedded earnings. Zubretsky highlighted that while downside exists if cost trends accelerate, margin recovery depends on rate adjustments and normalization of medical utilization.
- Scott Fidel (Goldman Sachs) asked about Medicare performance, especially the impact of recent acquisitions and dual eligible growth. Management was cautious, noting margin neutrality as the baseline due to product changes and a focus on high-acuity populations.
Catalysts in Upcoming Quarters
Looking forward, the StockStory team will be monitoring (1) whether state Medicaid rate increases are sufficient to keep up with or exceed medical cost trends, (2) Molina’s ability to execute on Marketplace repricing and manage its reduced footprint profitably, and (3) the integration and margin performance of new contract wins in Georgia, Texas, and the Medicare dual eligible segment. Progress on the acquisition pipeline and stabilization of utilization trends across all segments will also be important indicators of future performance.
Molina Healthcare currently trades at $161.37, down from $194.63 just before the earnings. At this price, is it a buy or sell? Find out in our full research report (it’s free for active Edge members).
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