Molina Healthcare Reports Mixed Q4, Issues Cautious 2026 Outlook as Shares Tumble
Managed care provider MOLINA HEALTHCARE INC (NYSE:MOH) delivered a quarterly financial report marked by a stark divergence between top-line performance and bottom-line results, triggering a severe negative reaction in the after-hours market. The company’s fourth-quarter figures for 2025 surpassed revenue expectations but revealed significant pressure on medical costs, culminating in a substantial per-share loss. More critically, management’s earnings guidance for the full year 2026 fell dramatically short of Wall Street’s forecasts, casting a long shadow over near-term profitability.
Earnings Snapshot: Revenue Beat Overshadowed by Deep Loss
For the quarter ended December 31, 2025, Molina’s performance versus analyst estimates presented a mixed picture:
- Revenue: $11.38 billion, an increase of 8.3% year-over-year and above the consensus estimate of approximately $10.96 billion.
- Adjusted Earnings Per Share (EPS): A loss of $2.75, severely missing the estimate for a profit of $0.34 per share.
This discrepancy highlights the core issue: medical costs are rising faster than premium revenue can offset them. The company’s consolidated Medical Care Ratio (MCR)—the percentage of premium revenue spent on medical care—jumped to 94.6% in Q4 2025 from 90.2% in the prior-year period. For the full year 2025, the MCR was 91.7%, up from 89.1% in 2024. Management attributed the quarterly and annual profit pressure to approximately $2.00 per share of unfavorable retroactive premium adjustments in its Medicaid business and ongoing medical cost trends in Medicare and Marketplace segments.
Market Reaction: Guidance Shock Drives Sell-Off
The market’s reaction was swift and severe, with the stock plummeting approximately 32% in after-hours trading. This dramatic move is directly tied to the company’s outlook for 2026, which investors found deeply disappointing.
- 2026 EPS Guidance: Molina expects full-year 2026 adjusted earnings of at least $5.00 per diluted share. This guidance is burdened by $2.50 per share related to implementing a new Florida Medicaid contract and underperformance in a Medicare Advantage Part D (MAPD) product it plans to exit in 2027.
- Vs. Analyst Expectations: The provided $5.00 floor is less than half of the Wall Street consensus estimate, which was north of $11.00 per share for 2026. The guidance implies a steep year-over-year decline from the 2025 adjusted EPS of $11.03.
- Revenue Guidance: The company expects 2026 premium revenue of approximately $42 billion, which would represent a 2% decline from 2025. Its total revenue guidance of $44.5 billion comes in nearly 5% below current analyst sales estimates of about $47.1 billion.
CEO Joseph Zubretsky framed 2026 as a "trough year for Medicaid industry margins," expressing confidence in the company's "durable and sustaining operating platform" and optimism about future earnings trajectory once rates realign with medical cost trends.
Strategic Shift and Key Press Release Highlights
Beyond the financial figures, the earnings release outlined several significant strategic developments:
- Exit from Medicare Advantage Part D: The company announced it will exit its traditional Medicare Advantage Part D product for the 2027 plan year. This segment, with about $1 billion in annual premium, has been underperforming and does not align with Molina’s strategic focus on its dual-eligible Medicare business.
- Focus on "Embedded Earnings": Management emphasized "new store embedded earnings," which it estimates are now over $11.00 per share. This refers to the future earnings potential from recently awarded state contracts and acquisitions that are not yet fully reflected in the current year’s results. This concept is central to management’s argument that 2026 is a temporary low point.
- Cash Position: Cash and investments at the parent company declined to $223 million as of December 31, 2025, from $445 million a year earlier. Operating cash flow for the year was an outflow of $535 million, compared to an inflow of $644 million in 2024, driven by Medicaid settlements, tax timing, and lower second-half operating performance.
Conclusion
Molina Healthcare’s fourth-quarter report underscores the intense margin pressure facing the Medicaid-focused managed care sector. While the company continues to grow its revenue base, the imbalance between medical cost inflation and reimbursement rates has severely compressed profitability. The market’s violent reaction is a clear verdict on the company’s subdued 2026 guidance, which signals that this pressure will persist in the near term. Investors are now tasked with weighing management’s promise of a significant earnings recovery post-2026 against the tangible profitability reset occurring now. The success of Molina’ strategic pivot away from underperforming MAPD plans and toward its dual-eligible and new Medicaid contracts will be critical to validating that long-term optimism.
For a detailed look at Molina Healthcare’s historical earnings and future estimates, visit the earnings and estimates page on Chartmill.
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