After the market closed on Wednesday, Molina Healthcare reported second-quarter earnings that were better than anticipated. Sales of $10.87 billion were slightly above Wall Street's estimate of $10.83 billion.
Adjusted earnings per share of $1.51 beat consensus expectations of $1.39. Molina also raised its full-year guidance for adjusted earnings per share by $0.25, to at least $5.25.
But the results didn't immediately comfort investors, who have had questions about the extent of cost pressures on the Medicaid business, Molina's main source of premium revenue. Shares fell nearly 10% in after-hours trading.
Wall Street has grown more confident that insurers in the Medicare Advantage market for seniors are taming elevated medical spending. But when it comes to Medicaid, a joint federal and state program serving lower-income beneficiaries, the market hasn't been as sure.
Molina's medical cost ratio -- a measure of what percentage of premium revenue is being spent on claims -- came in at 92.2%, just below expectations of 92.4%.
Within its three insurance segments, Molina noted variability in that metric, saying its Medicaid medical cost ratio was "in line" with company expectations, while its smaller Medicare portfolio came in "better" than internal expectations.
Management has characterized 2026 Medicaid margins as a "trough" that can improve going forward. Molina stock edged down about 7% over two days last week after insurers Elevance Health and UnitedHealth Group spoke of continuing Medicaid cost pressures on their respective second-quarter earnings calls July 15 and July 16.
In Molina's third business line, the Affordable Care Act marketplace, its medical cost ratio was higher than what the company anticipated.
"We remain confident in our disciplined approach to medical cost management and believe the premium and EPS building blocks position us well for profitable growth in 2027," CEO Joseph Zubretsky said in a press release. The company's investor call is schedule for Thursday morning.
All in all, Molina's stock has performed better this year compared with 2025, when shares lost 40%. Shares have gained almost 28% this year, as of Wednesday's close.
The stock has an average Hold rating and target price of $210.88.
TD Cowen analyst Ryan Langston says that, while he believes Molina is "uniquely positioned to grow" through contract wins and acquisitions, his Hold rating reflects a "challenging macro environment," such as states contending with budget deficits.
Write to Catherine Dunn at catherine.dunn@dowjones.com
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(END) Dow Jones Newswires
July 22, 2026 18:35 ET (22:35 GMT)
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