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MH

MOLINA HEALTHCARE, INC. (MOH)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 was operationally challenged: adjusted EPS of $5.05 on $10.499B total revenue as consolidated MCR rose to 90.2% on elevated Medicaid and Medicare utilization; management explicitly said the quarter “did not meet our expectations.” Bold negative variances stemmed from risk corridors providing no material benefit and higher-than-anticipated medical cost trend in Medicaid and Medicare .
  • Full-year adjusted EPS of $22.65 missed prior guidance of at least $23.50; premium revenue of $38.627B modestly exceeded the prior ~ $38B guidance. Bold: Miss vs EPS guidance; premium revenue exceeded guidance .
  • 2025 guidance introduced: premium revenue ~$42.0B, adjusted EPS ≥ $24.50, consolidated MCR 88.7%, and embedded earnings increased to $7.75/share (with ~$1.00/share implementation costs), supported by contract wins (e.g., Georgia Medicaid, multiple Duals) and the ConnectiCare acquisition closing on Feb 1, 2025 .
  • Capital actions: repurchased ~1.7M shares for $500M in Q4; parent cash ended at $445M; completed $750M senior notes due 2033 in November—positioned with liquidity for growth initiatives .
  • Stock-relevant narrative: near-term pressure from elevated utilization and corridor geography offsets; medium-term catalysts include rate actions, embedded earnings from contract wins, Marketplace growth at mid-single-digit pretax margins, and Medicare D-SNP repositioning for integrated products in 2026 .

What Went Well and What Went Wrong

What Went Well

  • Marketplace outperformance: FY MCR 75.4% (better than expectations) after reinvesting excess margin; management targets 79% MCR and ~6% pretax margin for 2025 while achieving competitive silver pricing and strong enrollment .
  • Growth platform strengthened: Georgia Medicaid award (~$2B annual premium), Duals wins across Ohio, Michigan, Massachusetts, Idaho (> $3B incremental revenue), and ConnectiCare closing (adds ~140K members; ~$1.2B revenue mostly Marketplace) .
  • G&A discipline: adjusted G&A ratio 6.7% for FY 2024; Q4 adjusted G&A 6.3% aided by vendor renegotiations and one-time items; 2025 guidance normalizes to 7.0% adjusted G&A (6.6% ex implementation/mix) .

Management quotes:

  • “Our fourth quarter results and performance metrics did not meet our expectations, but we did demonstrate a continued ability to maintain operating discipline while navigating industry-wide headwinds.”
  • “Two consecutive years of exceeding target margins have allowed us to reinvest several hundred basis points of excess margin into pricing in order to grow.”

What Went Wrong

  • Medicaid trend and corridor benefit: Q4 Medicaid trend ~1.2% vs forecast 0.5%; “risk corridors providing no material benefit” due to geography mismatch; consolidated MCR 90.2% was higher than expected .
  • Medicare cost pressure: Q4 Medicare MCR 93.8% (industry-wide utilization in LTSS, pharmacy, inpatient/outpatient; risk adjustment ultimate lowered); Bright slightly below breakeven in 2025 before accreting in out-years .
  • FY EPS guidance miss: FY adjusted EPS $22.65 vs prior guidance ≥$23.50, driven by second-half Medicaid and Medicare utilization; parent cash down to $445M from $742M YoY amid corridor settlements and buybacks .

Financial Results

Quarterly performance (sequential trend: Q2 → Q3 → Q4 2024)

MetricQ2 2024Q3 2024Q4 2024
Premium Revenue ($USD Billions)$9.446 $9.694 $9.983
Total Revenue ($USD Billions)$9.880 $10.340 $10.499
GAAP Diluted EPS ($)$5.17 $5.65 $4.44
Adjusted Diluted EPS ($)$5.86 $6.01 $5.05
Consolidated MCR (%)88.6% 89.2% 90.2%
Adjusted G&A Ratio (%)6.9% 6.4% 6.3%
Adjusted After-tax Margin (%)3.5% 3.4% 2.7%

Q4 2024 vs Q4 2023 (YoY)

MetricQ4 2023Q4 2024
Premium Revenue ($USD Billions)$8.362 $9.983
Total Revenue ($USD Billions)$9.048 $10.499
GAAP Diluted EPS ($)$3.70 $4.44
Adjusted Diluted EPS ($)$4.38 $5.05
Consolidated MCR (%)89.1% 90.2%
G&A Ratio (%)7.1% 6.3%
After-tax Margin (%)2.4% 2.4%

Segment breakdown (Q4 2024 vs Q4 2023)

SegmentPremium Revenue Q4 2023 ($MM)Medical Margin Q4 2023 ($MM)MCR Q4 2023 (%)Premium Revenue Q4 2024 ($MM)Medical Margin Q4 2024 ($MM)MCR Q4 2024 (%)
Medicaid$6,782 $731 89.2 $8,041 $791 90.2
Medicare$1,057 $71 93.3 $1,292 $81 93.8
Marketplace$523 $106 79.8 $650 $108 83.3
Consolidated$8,362 $908 89.1 $9,983 $980 90.2

KPIs and balance/cash

KPIQ2 2024Q3 2024Q4 2024
Ending Membership (Total)5,579,000 5,598,000 5,535,000
Medicaid Ending Membership4,942,000 4,941,000 4,890,000
Medicare Ending Membership251,000 247,000 242,000
Marketplace Ending Membership386,000 410,000 403,000
Days in Claims Payable50 48 48
Parent Cash & Investments ($MM)$235 $195 $445
Share Repurchases—~1.5M shares repurchased in Q3 ~1.7M shares repurchased; $500M cost

Non-GAAP reconciliation (Q4 2024)

AdjustmentAmount ($MM)Per Diluted Share ($)
Amortization of intangible assets$21 $0.36
Acquisition-related expenses$20 $0.35
Other$0 $0.00
Income tax effect$(6) $(0.10)
Adjusted net income$286 $5.05

Guidance Changes

MetricPeriodPrevious GuidanceCurrent Guidance / ActualChange
Adjusted EPS – Diluted ($)FY 2024≥ $23.50 $22.65 (actual) Lower/Miss
Premium Revenue ($B)FY 2024~ $38 $38.627 (actual) Slight Beat
Premium Revenue ($B)FY 2025N/A (initial issuance)~$42.0 New
Total Revenue ($B)FY 2025N/A (initial issuance)~$44.0 New
Adjusted EPS – Diluted ($)FY 2025N/A (initial issuance)≥ $24.50 (incl. ~$1.00 implementation) New
GAAP EPS – Diluted ($)FY 2025N/A≥ $22.50 New
Consolidated MCR (%)FY 2025N/A88.7% New
Adjusted G&A Ratio (%)FY 2025N/A7.0% (6.6% normalized) New
Effective Tax Rate (%)FY 2025N/A25.3% New
Membership (Total, YE)FY 2025N/A~5.9M (Medicaid 5.0M; Medicare 250K; Marketplace 580K) New
Diluted Weighted Avg Shares (M)FY 2025N/A55.6 New

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2024)Previous Mentions (Q3 2024)Current Period (Q4 2024)Trend
Medicaid trend vs rates, risk corridorsConsolidated MCR 88.6%; Medicaid MCR 90.8% with retro and new stores; corridors buffered mismatch Known on-/off-cycle rate actions (4.5% avg Q3; ~9% avg Q4), ~$350M benefit; corridors ~200bps but usage rising Q4 net trend ~1.2% vs 0.5% forecast; corridors no material benefit; 2025 Medicaid MCR guide 89.9% with ~4.5% rates vs ~4.5% trend Elevated pressure; rate actions provide partial offset
Medicare utilization & risk adjustmentMCR 84.9%; favorable risk adjustment MCR 89.6%; LTSS/pharmacy/outpatient pressures; prior-year risk adjustment true-up impacted seq MCR Q4 MCR 93.8%; lowered risk adjustment ultimate; 2025 MCR ~89%; Bright slightly below breakeven Headwinds continued; reposition to D-SNP focus
Marketplace performance & pricingMCR 71.6%; favorable risk adjustment MCR 73.0%; SEP gains with healthier profile; strategy to invest excess margins Q4 MCR 83.3% seasonality; FY 75.4%; 2025 MCR ~79% with ~6% pretax margin; strong OE leading to ~580K YE Strong; growth with reinvestment
Embedded earnings & growth pipelineConnectiCare announced (to close Q1’25) [43 in list]Embedded earnings raised to $5.75; Michigan & Massachusetts Duals wins; Investor Day targets Embedded earnings now $7.75; Georgia Medicaid award; additional Duals; ConnectiCare closed 2/1 Strengthened
Legislative/regulatory macro—States responsive with off-cycle rates; corridors buffer until rates catch up Expect only marginal changes to Medicaid programs; bipartisan constraints Stable outlook

Management Commentary

  • CEO on Q4 underperformance: “Our fourth quarter results and performance metrics did not meet our expectations… our 90.2% consolidated MCR was higher than expected due to medical cost pressure in our Medicaid and Medicare segments.”
  • On Medicaid rates and trend: “We project 2025 premium revenue of approximately $42 billion and adjusted EPS… highlighted by an 88.7% consolidated MCR… Medicaid… 89.9% MCR… 2025 Medicaid rates… expected to be sufficient to capture this elevated trend.”
  • On Marketplace strategy: “Two consecutive years of exceeding target margins have allowed us to reinvest several hundred basis points of excess margin into pricing in order to grow.”
  • On corridors: “Risk corridors providing no material benefit” in Q4 due to geography; corridor depth uneven across states .
  • On growth wins: Georgia Medicaid (~$2B) and Duals expansions (> $3B incremental revenue) materially increase embedded earnings to $7.75/share .

Q&A Highlights

  • Medicaid MCR and corridor mechanics: Trend overshot forecast (1.2% vs 0.5%); corridor benefits were geographically mismatched; states vary and protection is uneven .
  • Medicare pressures and bid posture: LTSS/pharmacy/outpatient utilization; lowered risk adjustment ultimate; 2025 MCR guided to ~89% with conservative bids; Bright slightly below breakeven in 2025 .
  • Marketplace seasonality and growth math: Q4 MCR seasonally higher; reinvested excess margin to drive growth; effectuation rates mid-80s; renewal retention ~70% .
  • Quarterly earnings cadence: 2025 earnings expected evenly distributed (front-loaded G&A for implementations; rate timing; Marketplace seasonality balanced by segment mix) .
  • Rates vs trend trajectory: 2025 assumes ~4.5% rate increases (75% known at ~5%; 25% estimated at ~2.5%) vs ~4.5% trend; off-cycle rate updates evidence states catching up .

Estimates Context

  • Wall Street consensus comparisons were unavailable from S&P Global due to access limits at the time of retrieval; management did not disclose external consensus in filings. As a result, estimate beat/miss analysis cannot be presented for Q4 2024. We will update this section when S&P Global data is accessible [GetEstimates error: Daily Request Limit Exceeded].

Key Takeaways for Investors

  • Near-term caution: Bold—FY 2024 adjusted EPS missed prior guidance and Q4 MCR rose to 90.2% on utilization; corridor protection did not offset geography of pressure, implying continued vigilance into early 2025 .
  • Medium-term setup: Bold—2025 guidance embeds ≥ $24.50 adjusted EPS with consolidated MCR 88.7%; rate actions plus contract wins support earnings rebound off an elevated 2024 cost baseline .
  • Medicaid sensitivity: Expect margins to hover ~90% until further rate actions; “rate action vs cycle” comment suggests Molina may need fewer cycles than peers to return to top-end target range, given ~100bps gap vs long-term target .
  • Marketplace remains a growth and margin contributor: Two years of outperformance enable reinvestment; expect ~79% MCR and ~6% pretax margin with strong effectuation and retention—supports cash generation and embedded earnings harvest .
  • Medicare is transitioning: 2025 is a bridge year as D-SNP footprint expands; Bright slightly below breakeven near term but expected accretive over time; integrated products in 2026 are a margin expansion opportunity .
  • Capital deployment provides EPS leverage: Buybacks (~$500M Q4) reduce share count; debt financing available; parent cash remains adequate to fund implementations and M&A .
  • Trading implications: Near term, headlines around utilization/trend, corridor benefit, and rate adequacy likely drive volatility; medium term, catalysts are rate updates, Georgia/Duals ramps, ConnectiCare contribution, and embedded earnings realization—position sizing should reflect execution on implementations and rate clarity .