Zacks Investment Research downgrades Molina Healthcare after C-suite shake-up

Dive Brief:

  • Zacks Investment Research downgraded Molina Healthcare to “hold” on Monday, Breaking Finance News reported.

  • Thirteen brokerages have issued a recent ratings update for Molina. Four of them rated the stock as a "strong buy," two rated it as a "buy," eight suggested a "hold," and two rated it as "underperform," reported Breaking Finance News. 

  • Molina Healthcare earlier this month dismissed President and CEO Dr. J. Mario Molina and his brother, CFO John C. Molina. Molina's stock closed at $67.56 on Monday, up from $50.80 on May 1 (the day before the executive shake-up was announced). 

Dive Insight:

The stock downgrade to “hold” is not great news for Molina Healthcare, but it could be worse. The fact that most of the brokerages that recently issued a ratings update for Molina suggested “hold” should fill the company with some optimism.

It's not surprising why none of the 13 brokerages rated the stock as a "sell." Since the beginning of the month, Molina's stock price has grown nearly 25%. Though it is yet to be seen how the new C-suite will affect the business and stocks in the long term. The board has named Molina's Chief Accounting Officer Joseph W. White as interim president and CEO, as well as CFO. 

At that time of the Molinas' dismissal, Board of Directors Chairman Dale B. Wolf pointed to “disappointing financial performance” as a reason for the decision. The company reported in its first-quarter earnings its income before taxes increased from $64 million in the first quarter of 2016 to $131 million in the first quarter of 2017.

However, Molina Healthcare, which has 4.2 million members in 12 states and Puerto Rico for Medicare, Medicaid, and ACA exchanges, struggled with ACA exchanges last year with the payer reportedly losing at least $110 million before income taxes last year in the marketplace. Insurers are still deciding whether and to what extent to participate on the individual exchange market next year.

J. Mario Molina previously advocated for the exchanges, but acknowledged in February that the company had become leery of the exchanges because of “too many unknowns.”

He also spoke out about the Republican House plan to repeal and replace ACA and the possibility that Republicans might stop funding cost-sharing subsidies to payers in the exchanges. The subsidies help payers provide coverage for lower-income Americans in the exchanges. 

Filed Under: Payer