Molina, Centene shares soar on Ohio Medicaid contract wins
(Reuters) – Shares of Molina Healthcare Inc (MOH.N: Quote, Profile, Research) and Centene Corp (CNC.N: Quote, Profile, Research) spiked in early Friday trade after the health insurers won contracts to continue as Medicaid plan providers in the state of Ohio.
Molina and Centene were among those that protested in April after they did not figure among the five plans that were initially selected to service the state’s Medicaid members.
Molina shares have nearly halved in value since then. Much of the decline was due to the company withdrawing its 2012 earnings forecast on Wednesday, as the costs of a Texas Medicaid plan outstripped premium revenue.
“Retaining the Ohio contract is a huge deal for Molina, since the state represented 25 percent of their earnings last year, and it’s not insignificant for Centene either,” Citigroup analyst Carl McDonald said in a note to clients.
In April, the two companies had lost the Medicaid contract in Ohio for 2013 to peers Aetna Inc (AET.N: Quote, Profile, Research), UnitedHealth Group (UNH.N: Quote, Profile, Research) and three private companies.
At the time, analysts had estimated that Centene would take a hit of 25 cents per share.
Aetna and privately held Meridian Health Plan have now been dropped from the contract, analysts said, adding that they expect both companies to protest the latest decision.
“We believe that there could be more legal action on the horizon before this award is implemented,” Barclays analyst Joshua Raskin said in a note to clients.
Aetna and Meridian could not immediately be reached for comments.
Molina shares soared 26 percent to $22.40, while Centene rose 11 percent to $36.45 in morning trade on the New York Stock Exchange.
(Reporting by Balaji Sridharan and Esha Dey in Bangalore; Editing by Roshni Menon)