Los Angeles Business Journal

Molina Sees Texas Turnaround in Quarter

By Deborah Crowe Wednesday, October 24, 2012

Shares of Molina Healthcare Inc. jumped more the 13 percent Wednesday after the managed care provider reported a third quarter profit even though Wall Street had expected a loss. The company cited improved results in Texas, which generates about a fourth of the company’s revenue.

The Long Beach company, which provides Medicaid coverage for the poor and disabled, late Tuesday reported net income of $3.4 million (7 cents a share), compared with $19 million (41 cents) in the same period a year earlier. Revenue soared 31 percent to $1.54 billion.

Analysts surveyed by Thomson Reuters on average expected Molina Healthcare to report a net loss of 11 cents a share on revenue of $1.51 billion.

“Our third quarter results demonstrate the tremendous opportunities we have before us,” Chief Executive J. Mario Molina said in a statement.

In the year-earlier quarter, higher-than-expected medical costs in new markets that the company had entered in Texas resulted in Molina Healthcare reporting a net loss of 80 cents a share and withdrawing its full-year guidance. Membership growth, cost reductions and negotiation of a rate increase with state regulators have helped turn that market around.

The company also benefited from growth in its Washington state operations, which more than offset the loss of a key state contract in Missouri. But a drag on earnings came from higher medical costs in its fourth largest market, California. The increase largely came from higher costs in caring for the aged, blind and disabled, the company said, adding that state regulators are considering adjusting rates.

Shares on Wednesday closed up $3.08, or 14 percent, to $25.81 on the New York Stock Exchange.