Molina Rallied on a $6 Billion Contract It Will Lose Money On in Year One
Molina takes over Florida's Medicaid plan for about 120,000 children with special needs, a contract worth about $6 billion of annual premium at full scale and a guided first-year loss. The shares now trade at a premium multiple in a year when consensus has earnings down by half.
Richard Tang · 3 min read
Molina Healthcare's+0.91% — Molina Healthcare, up 0.91 percent today stock rose more than 3 percent on October 12 and again the next day, with the second day's surge credited to its new Florida children's Medicaid contract and its focus on dual-eligible members, people covered by both Medicare and Medicaid 12. On October 1 the insurer took over Florida's Children's Medical Services plan, coverage for about 120,000 children with special healthcare needs, from Sunshine Health, the Florida plan of rival insurer Centene 3. At full scale it should add about $6 billion of annual premium 34. Molina's own guidance expects the launch to lose $1.50 per share in the fourth quarter 5.
The win is real, and the first year is a loss
Molina announced the award in November 2025 and expects to run the plan through 2030, with Florida's continuity-of-care rules letting children keep current providers until May 2027 36. The company still guides to at least $5.25 of adjusted earnings per share for 2026, a figure that already absorbs the launch cost 5. The rally also priced two retreats. Molina exits its loss-making Medicare Advantage prescription-drug business for 2027, a line guiding to a further $1.00 per-share loss 5. That exit already forced a $93 million impairment last quarter, and Marketplace exposure shrinks by about $1 billion next year 54.
Revenue stalled and turned down just as the $6 billion contract begins
Data
| Quarterly revenue | |
|---|---|
| Q1 '24 | $9.93B |
| Q2 '24 | $9.88B |
| Q3 '24 | $10.34B |
| Q4 '24 | $10.5B |
| Q1 '25 | $11.15B |
| Q2 '25 | $11.43B |
| Q3 '25 | $11.48B |
| Q4 '25 | $11.38B |
| Q1 '26 | $10.8B |
| Q2 '26 | $10.87B |
The profit waits on Florida's rate schedule
Nothing Molina has published states what the Florida contract will earn once implemented. That number follows the per-member rates Florida sets in coming payment cycles, and analysts following the stock put the first test at January's Medicaid rate updates 7.
The rest of the Medicaid book shows the bind. The segment spent 92.7 cents of every premium dollar on medical care last quarter, against full-year assumptions of rates rising 4 percent and costs rising 5 45. Chief executive Joseph Zubretsky calls 2026 the trough year, with the imbalance corrected by future rate increases 5.
Consensus has Molina's 2026 earnings down 52 percent 4, and the recovery plan reaches $25 of earnings per share only in 2029 7. The average analyst target is $205.81, below the $209.50 close on October 13 427.
Molina trades richer than its industry and its biggest Medicaid rival
Data
| Value | |
|---|---|
| Molina (MOH) | 22.43x |
| Industry average | 15.38x |
| Centene (CNC) | 12.47x |
The AI lever is the small lever
Molina has moved its systems to the cloud and is automating administration with AI; Centene points to analytics in payment integrity and behavioral health 4. Those programs deserve scrutiny, but they reach only the administrative slice, 6.7 percent of revenue last quarter 5. Most of every premium dollar buys medical care whose price is set by state rate formulas, not software.
The tests are October 21, then January
Third-quarter results land on October 21, after the close, and will show whether the trough is holding 5. The law firm Bronstein, Gewirtz & Grossman said on September 20 it was investigating potential shareholder claims, and on October 11 invited investors who bought before February 5, 2025, to inquire; the probe's subject remains undisclosed 81.
Meanwhile the Florida families mid-switch are re-confirming prescriptions, appointments and medical transport, with the state covering current providers through May 2027 6. The bull case pays today for a margin that exists so far only as management's expectation. The rate schedule that would make it a fact has not appeared in anything Molina has published.
Deepdive
AI-generated from this story and its cited sources. Not investment advice.
