Molina Healthcare Cuts Guidance for the Third Time. That’s Not the Only Reason the Stock Is Sinking.

Molina Healthcare posted adjusted earnings of $1.84 a share for the third quarter, missing analysts’ calls for $3.90. (Dreamstime)

Key Points

• Molina Healthcare’s third-quarter adjusted earnings of $1.84 a share significantly miss the Wall Street forecast of $3.90.
• The company cut its full-year adjusted earnings outlook for the third time to $14 a share, down from “no less than $19” previously.
• Underperformance in its Affordable Care Act marketplace business and elevated medical costs were key drivers of the earnings miss.

Molina Healthcare posted third-quarter earnings that fell sharply below consensus and cut its guidance for the third time in months, citing cost pressure and underperformance in one of its lines of business.

Adjusted earnings of $1.84 a share came in far below the $3.90 Wall Street had forecast, according to FactSet, while total revenue of $11.48 billion topped the $10.97 billion analysts had expected. Net income in the quarter sank to $79 million from $326 million last year.

Notably, Molina slashed its full-year earnings outlook, saying it now expects adjusted earnings of $14 a share. The managed care company had called for earnings of “no less than $19” in July, down from $22 at the midpoint of the previous range and marking the second guidance cut in weeks.

Shares slumped 18% to $160.40 on Thursday. The benchmark S&P 500 index was up 0.7%.

“The headline for the quarter is that approximately half of our underperformance is driven by the marketplace business, and that Medicaid, while experiencing some pressure, is producing strong margins,” Molina CEO Joseph Zubretsky said.

The company reported a consolidated medical care ratio of 92.6% for the third quarter. For Medicaid alone, that number was 92%. Molina said it “experienced medical cost pressure due to continued high levels of utilization,” which were partially offset by the rate updates that went into effect during the quarter.

Mizuho analysts referred to the third-quarter print as an overall disappointment. “The miss and guidance reduction reflects elevated medical cost trends in all three of its business lines, but underperformance in its (Affordable Care Act) marketplace business was a main driver of the miss,” the analysts noted after the report Wednesday afternoon. The firm continues to rate Molina at Outperform with a $228 price target.

TD Cowen analysts cited Molina’s conviction that margin challenges would be temporary, adding that the company was “encouraged by the margin improvement potential in 2026.” The firm downgraded Molina from Buy to Hold last week, and maintains the rating with a $203 price target.

The earnings report was weighing on shares of fellow insurer Centene , which tumbled 4.7%. Like Molina, Centene has repeatedly adjusted its full-year guidance. The company withdrew its outlook in July, triggering a brutal selloff, before issuing new guidance later that month that was reaffirmed in September.

Write to Mackenzie Tatananni at mackenzie.tatananni@barrons.com