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MH

MOLINA HEALTHCARE, INC. (MOH)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 total revenue was $11.43B (+15.7% YoY) with adjusted EPS of $5.48 (−6% YoY) and consolidated MCR of 90.4%, reflecting broad-based medical cost pressure across Medicaid, Medicare, and Marketplace .
  • The company reduced FY25 guidance to adjusted EPS ≥ $19.00 (from ≥ $24.50) and GAAP EPS ≥ $16.90; FY25 consolidated MCR is now 90.2% with segment MCRs: Medicaid 90.9%, Medicare 90.0%, Marketplace 85.1% .
  • Versus Street for the quarter: revenue beat ($11.43B vs $10.94B*) while EPS was slightly below consensus ($5.48 vs $5.53*); management called the new EPS floor “a floor” with upside if trend moderates .
  • Narrative/catalysts: accelerated medical trend and Marketplace risk pool acuity (risk adjustment shortfall), DCP dropped to 43 days from 46 due to faster processing/settlements, and FY25 guidance reset; management highlighted embedded earnings of $8.65 per share and second-pass flexibility on 2026 Marketplace filings .

What Went Well and What Went Wrong

What Went Well

  • Premium revenue grew to ~$10.9B (+15% YoY) on new contracts, acquisitions, footprint growth and rate increases, despite 2024 redetermination impacts .
  • G&A discipline: Q2 GAAP G&A 6.2% and adjusted G&A 6.1%, aided by lower incentive comp and operating efficiencies; FY25 adjusted G&A guided to ~6.6% (better by ~30 bps) .
  • Strategic positioning: embedded earnings power remains $8.65 per share, with opportunistic M&A pipeline and ~$1–$2B dry powder, supporting medium-term growth .
    Quote: “Our second quarter results and revised full year outlook reflect a challenging medical cost trend environment… nothing has changed our outlook for the long-term performance of the business.” — CEO Joseph Zubretsky .

What Went Wrong

  • Consolidated MCR rose to 90.4%; Medicaid MCR 91.3% on behavioral, pharmacy, and acute utilization; Medicare MCR 90.0%; Marketplace MCR 85.4% with higher utilization relative to risk adjustment .
  • FY25 guidance cut: adjusted EPS ≥ $19.00 and GAAP EPS ≥ $16.90, driven disproportionately by Marketplace; consolidated MCR +140 bps vs initial guidance .
  • DCP fell to 43 (mid-40s guided) due to faster adjudication, pass-through payments, and discrete settlements; operating cash flow for 1H25 was an outflow of $112M on timing and risk corridor settlements .
    Analyst concern: Marketplace risk pool acuity higher industry-wide (Wakeley), limiting risk adjustment protection and pressuring margins .

Financial Results

Core P&L and Key Ratios (chronologically: Q2’24 → Q1’25 → Q2’25)

MetricQ2 2024Q1 2025Q2 2025
Total Revenue ($USD Billions)$9.88 $11.15 $11.43
GAAP EPS – Diluted ($)$5.17 $5.45 $4.75
Adjusted EPS – Diluted ($)$5.86 $6.08 $5.48
Consolidated MCR (%)88.6% 89.2% 90.4%
GAAP G&A Ratio (%)7.0% 6.9% 6.2%

Quarterly vs Street (Q2 2025)

MetricConsensusActual
Revenue ($USD Billions)$10.94*$11.43
Adjusted EPS ($)$5.53*$5.48
# of EPS Estimates14*—
# of Revenue Estimates11*—
  • Revenue beat; EPS modest miss. Values marked with * retrieved from S&P Global.

Segment Breakdown (Q2 2024 vs Q2 2025)

SegmentPremium Revenue ($USD Millions)Medical Margin ($USD Millions)MCR (%)
Medicaid (Q2 2024 → Q2 2025)$7,378 → $8,029 $683 → $697 90.8% → 91.3%
Medicare (Q2 2024 → Q2 2025)$1,441 → $1,608 $217 → $161 84.9% → 90.0%
Marketplace (Q2 2024 → Q2 2025)$627 → $1,200 $178 → $175 71.6% → 85.4%
Other (Q2 2024 → Q2 2025)— → $31 — → $6 — → 82.7%
Consolidated (Q2 2024 → Q2 2025)$9,446 → $10,868 $1,078 → $1,039 88.6% → 90.4%
  • Marketplace excludes ~300 bps from prior-year reconciliations and ConnectiCare “new store” impact; normalized Q2 Marketplace MCR ~82.4% but still above expectations .

KPIs

KPIQ4 2024Q1 2025Q2 2025
Ending Membership – Total5,535,000 5,752,000 5,746,000
Medicaid4,890,000 4,812,000 4,774,000
Medicare242,000 260,000 267,000
Marketplace403,000 662,000 690,000
Days in Claims Payable (DCP)48 46 43
Cash FlowH1 2024H1 2025
Operating Cash Flow ($USD Millions)$(5) $(112)
Shares & BalanceQ1 2025Q2 2025
Diluted Avg. Shares (millions)54.8 53.7
Parent Cash & Investments ($USD Millions)$191 ~$100

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Premium RevenueFY 2025~$42.0B ~$42.0B Maintained
Total RevenueFY 2025~$44.0B ~$44.0B Maintained
Adjusted EPS – DilutedFY 2025≥ $24.50 ≥ $19.00 Lowered
GAAP EPS – DilutedFY 2025≥ $22.50 (Feb) / ≥ $22.32 (Apr) ≥ $16.90 Lowered
Consolidated MCRFY 202588.7% 90.2% Higher (worse)
Medicaid MCRFY 2025N/A90.9% New disclosure
Medicare MCRFY 2025N/A90.0% New disclosure
Marketplace MCRFY 2025N/A85.1% New disclosure
GAAP G&A RatioFY 20257.2% 6.7% Lower (better)
Adjusted G&A RatioFY 20257.0% 6.6% Lower (better)
Effective Tax RateFY 202525.3% 25.3% Maintained
GAAP Pre-tax MarginFY 2025N/A (Feb showed after-tax)2.8% New disclosure
Adjusted Pre-tax MarginFY 2025N/A (Feb showed after-tax)3.1% New disclosure
Diluted SharesFY 202555.6M 54.1M Lower

Note: On July 7, 2025, the company pre-announced Q2 and narrowed FY25 adjusted EPS to $21.50–$22.50 before resetting on July 23 to a ≥ $19.00 floor .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2 and Q-1)Current Period (Q2 2025)Trend
Medical Cost TrendQ4’24: higher utilization and acuity shifts raised Medicaid MCR to 90.3% ; Q1’25: consolidated MCR 89.2% with Medicaid MCR 90.3% Unprecedented acceleration across behavioral, pharmacy, inpatient/outpatient; Medicaid MCR 91.3% Worsening
Marketplace Risk Pool & PricingQ4’24: Marketplace MCR 75.4% better than expected ; Q1’25: reported 81.7% with reconcil./new store items Reported 85.4%; normalized ~82.4%; industry risk pool acuity +8% (Wakeley); 2026 filings to reflect catch-up/trend/acuity; second-pass flexibility Deteriorating
G&A EfficiencyFY24 G&A 6.7% ; Q1’25 6.9% Q2 adjusted G&A 6.1%; FY25 adjusted G&A ~6.6% (better by ~30 bps) Improving
DCP / ReservesDCP 48 (FY24) ; DCP 46 (Q1’25) DCP 43; faster processing and settlements; mid-40s guide Down (expected to stabilize mid-40s)
Legislative/Policy (Budget Bill)Limited discussion earlierGradual impacts expected 2027–2028; 15–20% of expansion population potentially affected; state variability and mitigation likely Elevated focus
AI/Tech in CodingNot highlightedNoted as a supply-side driver (coding/bundling using AI) among multiple cost pressures Newly highlighted

Management Commentary

  • “We consider the $19 guidance to be a floor, as we believe the cost trend could moderate… 35 bps of MCR in the second half equates to $1 of upside EPS potential.” — CEO Joseph Zubretsky .
  • “States are adding a lot of flexibility this year… most of our states will allow a second pass rate filing… mitigating mispricing risk.” — CFO Mark Keim .
  • “Marketplace is just 10% of our revenue yet accounts for almost half of the consolidated increase in MCR.” — CFO Mark Keim .
  • “Our embedded earnings… remains at $8.65 per share… and we remain opportunistic on accretive M&A.” — CEO Joseph Zubretsky .
  • “Operating cash outflow in 1H25 reflects timing of government receivables and risk corridor settlements; DCP lower on faster adjudication and discrete settlements.” — CFO Mark Keim .

Q&A Highlights

  • Medicaid margin trajectory: H2 Medicaid MCR guided to ~91% (from 90.8% in H1) as trend outstrips known rates; states receptive to off-cycle/retro adjustments, but not assumed in guidance .
  • Marketplace pricing flexibility: States permit adjustments through August and “second pass” filings; acuity shift modeling conservative; risk pool acuity +8% YoY per Wakeley .
  • FY26 run-rate setup: Back-half run-rate ~$7.50/share; outcome hinges on 1/1 Medicaid rate cycle, Marketplace filings, and embedded earnings harvest; too early for FY26 EPS guide .
  • G&A outlook: FY25 adjusted G&A guided to ~6.6%; one-time lower comp in Q2 reverses in FY26 but offset by $1/share implementation costs disappearing .
  • Embedded earnings timing: ~$8.65/share ultimate still intact (≈$2.25 acquisitions, ≈$5.4 new wins + $1 implementation cost reversal), with ~one-third potentially realized in FY26 subject to rate cycle .

Estimates Context

  • Q2 2025: Revenue beat ($11.43B vs $10.94B*) and EPS slight miss ($5.48 vs $5.53*). #Estimates: EPS 14*, Revenue 11* .
  • FY 2025: Street revenue consensus ~$44.81B* vs company guidance ~$44.0B; Street EPS Normalized consensus ~$14.72* vs company adjusted EPS floor ≥ $19.00 (definitions differ; adjusted EPS includes specified add-backs) .
  • Post-guide reset, consensus EPS is likely to reassess toward company’s lower near-term margin outlook; revenue consensus modestly above company guidance suggests minor top-line recalibration. Values marked with * retrieved from S&P Global.

Key Takeaways for Investors

  • The quarter’s narrative is dominated by accelerating medical cost trend and risk adjustment shortfalls in Marketplace; a conservative H2 setup implies limited near-term upside absent trend moderation or off-cycle rates .
  • Guidance reset is significant; however, management’s “floor” framing and explicit sensitivity (35 bps MCR ≈ $1 EPS) create a practical framework for upside tracking into H2 .
  • Watch Medicaid rate actions (potential off-cycle updates, and 55% of premium renewing on 1/1/26) and second-pass Marketplace rate filings; these are key inflection levers for FY26 .
  • G&A execution continues to offset margin pressure; FY25 adjusted G&A guided lower to ~6.6% supports earnings resilience .
  • Embedded earnings ($8.65/share) and M&A pipeline provide medium-term support; dry powder of ~$1–$2B enables opportunistic capital deployment without constraining M&A .
  • Near-term trading: stock likely anchors to Margin/MLR updates, Marketplace rate filing headlines, and any signs of trend moderation; medium-term thesis centers on rate normalization and embedded earnings realization .
  • Risk factors: further acuity/demand increases, slower rate equilibrium, and Marketplace enrollment/acuity shifts tied to subsidy and integrity policy changes .

Appendix: Source Documents Reviewed

  • Q2 2025 Form 8-K and Exhibit 99.1 press release ; July 23, 2025 press release .
  • Q2 2025 earnings call transcript (July 24, 2025) .
  • Preliminary Q2 release (July 7, 2025) .
  • Prior quarters: Q1 2025 Form 8-K/press release ; Q4 2024 Form 8-K/press release .

Values marked with * retrieved from S&P Global.