Molina Healthcare Inc. (NYSE:MOH) encountered a substantial drop in its share value during extended trading on Thursday, following the release of its fourth-quarter results. The company reported a loss that significantly missed analysts' forecasts, intensifying investor concerns despite revenue surpassing estimates for the period.
The quarterly financial performance indicated a loss of $2.75 per share, a stark contrast to the expected earnings of 33 cents per share, based on Benzinga Pro data. On the revenue side, Molina registered $11.38 billion for the quarter, outperforming the consensus estimate of $10.86 billion.
In its fiscal 2025 projections and results, Molina provided detailed Medical Cost Ratio (MCR) figures across its various segments:
- Premium revenue for the full year was approximately $43.1 billion, marking an 11% increase year-over-year.
- The consolidated MCR stood at 91.7% for fiscal 2025.
- Medicaid MCR was reported at 91.8%, influenced by persistently high utilization levels.
- Medicare MCR reached 92.4%, driven by increased utilization among high-acuity members, particularly within long-term services and supports, pharmacy costs, and a slower margin recovery in the Medicare Advantage Part D product.
- The Marketplace segment posted an MCR of 90.6%, attributed to significantly elevated utilization compared to risk adjustment revenue.
Joseph Zubretsky, Molina's Chief Executive Officer, expressed a cautiously optimistic view despite the challenges, stating, “We remain confident in our durable and sustaining operating platform. We believe that the imbalance between rates and trend marks 2026 as a trough year for Medicaid industry margins. Even at this low point in the cycle, we continue to produce positive pretax margins in Medicaid.”
Looking ahead, Molina Healthcare projects an adjusted earnings per share of at least $5 for fiscal year 2026. The company anticipates a premium revenue contraction of approximately 2% from 2025 levels to around $42 billion. This decline is expected to be driven by a planned reduction in the Marketplace segment, partially offset by growth opportunities including the new Florida CMS contract in Medicaid and increased premiums in Medicare.
The stock reacted sharply to the earnings announcement and outlook, closing Thursday's after-hours trading session at $118 per share, down 33.3% according to Benzinga Pro data.
Financial Performance in Context
Molina's reported $2.75 per share quarterly loss sharply contrasted with analysts' expectations of a modest profit, underscoring significant pressures within its business segments. Despite the setback in earnings, the company's revenue performance demonstrated resilience, topping estimates and reflecting operational scale and expansion, especially with its premium revenue growth at 11% year-over-year.
However, the elevated Medical Cost Ratios across segments indicate rising costs related to member health care utilization, which weigh on profitability. For Medicaid, an MCR of 91.8% reflects ongoing high service utilization levels within this segment, a notable driver of cost. The Medicare segment exhibited an even higher MCR of 92.4%, primarily due to increased use of long-term care services, pharmacy expenses, and delayed margin recovery in its Medicare Advantage Part D offerings.
The Marketplace segment’s MCR of 90.6% points to utilization levels that greatly exceed earnings from risk adjustment revenue, signaling potential challenges in managing costs effectively in this area.
Outlook and Industry Implications
CEO Joseph Zubretsky’s characterization of 2026 as a "trough year" for Medicaid industry margins conveys that the company foresees a low point in profitability during the upcoming fiscal cycle, driven by rate and trend imbalances. Even so, Molina aims to sustain positive pretax margins within Medicaid, emphasizing operational durability despite these sector-wide headwinds.
The forecasted 2% reduction in overall premium revenue for 2026 signals a shift in Molina's portfolio mix, as the company scales back its Marketplace segment business while leveraging new contracts, such as the Florida CMS Medicaid agreement, and higher Medicare premiums to partially counterbalance this decrease.
Market Reaction and Investor Concerns
Investor response to the earnings report and forward guidance was swift and negative, with Molina’s shares falling by over 33% in after-hours trading. The steep decline highlights apprehension surrounding the company's earnings miss and the implications of high Medical Cost Ratios on future profitability and cash flow.
Given Molina’s central role in managing Medicaid, Medicare, and Marketplace health plans, its financial performance provides a lens into broader industry cost pressures, utilization trends, and regulatory contract dynamics impacting managed care organizations.
Summary
- Molina Healthcare reported a disappointing fourth-quarter loss of $2.75 per share, below the expected profit of 33 cents per share.
- Revenue for the quarter was $11.38 billion, beating estimates of $10.86 billion.
- Fiscal 2025 premium revenue exceeded $43 billion, growing 11% year-over-year.
- Medical Cost Ratios remain elevated across Medicaid (91.8%), Medicare (92.4%), and Marketplace (90.6%) segments, driven by high utilization.
- The company expects fiscal 2026 adjusted EPS of at least $5, while projecting a 2% decline in premium revenue due to segment adjustments.
- Following the report, Molina’s stock price plunged 33.3% to $118 per share in after-hours trading.
Key Points
- Fourth-quarter loss significantly wider than consensus estimates, spotlighting earnings challenges.
- Robust premium revenue and total revenue growth display expanding operational scale despite profitability pressures.
- Elevated Medical Cost Ratios reflect rising healthcare utilization costs impacting margins.
- Fiscal 2026 guidance anticipates premium revenue decline but positive adjusted earnings per share.
Risks and Uncertainties
- High utilization rates in Medicaid and Medicare segments may continue to pressure margins and cash flow.
- Margin recovery in Medicare Advantage Part D appears slower than anticipated, posing ongoing profitability risks.
- Reduction plans in the Marketplace segment could affect revenue diversity and growth potential.
- Market sensitivity to earnings misses and guidance revisions can result in significant stock price volatility.