Bernstein raises Molina Healthcare stock rating to Outperform

On Tuesday, Bernstein SocGen Group initiated coverage on Molina Healthcare, Inc. (NYSE:MOH) with an Outperform rating and set a price target of $414.00, representing significant upside from the current price of $302.09. The stock has experienced a notable 10% decline over the past week, according to InvestingPro data. The new coverage by Bernstein comes with a positive outlook for the Medicaid sector and Molina Healthcare’s position within it.

The research firm sees a favorable near and long-term outlook for Medicaid, despite some policy uncertainty in the upcoming months due to the Reconciliation process. Molina Healthcare is viewed as an effective competitor that is expected to grow at rates above the sector average, supported by its impressive 18.67% revenue growth in the last twelve months. With a GREAT financial health score from InvestingPro, and strong cash flow coverage of interest payments, Bernstein anticipates improving near-term margins for Medicaid, alongside significant long-term growth potential.

Analysts at Bernstein point out that Redetermination has led to a rate mismatch, but they expect state rate increases to align with the new risk pool and accelerate into 2026. They forecast that Molina Healthcare will reach target margins by 2027, supporting an estimated 16.6% earnings per share (EPS) growth over 2026/2027 as these margins recover.

Bernstein’s current policy outlook includes expectations of modest cuts to Medicaid ranging from $100 to $250 billion, primarily through the implementation of work requirements and tightened eligibility criteria. This may include the removal of federal matches for undocumented immigrants. However, Bernstein does not anticipate the elimination of state provider taxes, but acknowledges it as a potential wild card that could apply additional pressure to Medicaid enrollment.

The firm believes that near-term policy headwinds are less significant than the current valuation discounts suggest, with the stock trading at a P/E ratio of 13.33. According to InvestingPro’s Fair Value analysis, Molina Healthcare appears undervalued at current levels. This bullish stance on Molina Healthcare reflects an expectation of the company’s ability to navigate the changing policy landscape effectively while capitalizing on growth opportunities within the Medicaid sector. InvestingPro subscribers have access to 10 additional key insights about Molina Healthcare, along with comprehensive financial metrics and expert analysis in the Pro Research Report.

In other recent news, Molina Healthcare Inc . reported its fourth-quarter 2024 earnings, revealing an adjusted earnings per share (EPS) of $5.05, which fell short of the expected $5.77. However, the company’s revenue exceeded forecasts, reaching $10.5 billion against a forecast of $10.32 billion. Despite the revenue beat, the stock reacted negatively, dropping 10.77% in after-hours trading. Looking ahead, Molina Healthcare projects a premium revenue of $42 billion for 2025, indicating a 9% growth, and anticipates an adjusted EPS of $24.50, suggesting at least an 8% year-over-year increase. Meanwhile, Molina Healthcare secured a contract to administer a Fully Integrated Dual Eligible Special Needs Plan in Illinois, set to begin on January 1, 2026, with an initial duration of four years. Analyst firm Guggenheim initiated coverage on Molina Healthcare with a Neutral rating, highlighting the company’s significant involvement in the Medicaid market and potential for growth through acquisitions. Cantor Fitzgerald maintained an Overweight rating on the stock, emphasizing Molina’s exposure to Medicaid expansion and estimating a potential EPS of $1.65 from an estimated $20.2 billion in revenue. These developments come amidst a challenging environment with rising medical costs in Medicare potentially pressuring margins.

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