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Molina Healthcare (MOH) is under heavy pressure after badly missing Q4 EPS estimates and issuing downside FY26 guidance. The company reported an adjusted loss of $2.75/share when analysts had expected a profit, while revenue increased 8% yr/yr to $11.38 bln, above estimates. MOH guided FY26 EPS to at least $5.00 and revenue of $44.5 bln.

• The Q4 miss was driven by continued trend pressure in Medicare and Marketplace, plus about $2/share of retroactive Medicaid items in California.
• California applied a retroactive risk corridor and rate cut, a 160 bp headwind, alongside what management called an unprecedented cost-trend inflection, pushing Medicaid MCR to 93.5%, up 330 bps.
• Medicare's MCR was 97.5%, 370 bps higher, reflecting elevated LTSS and high-cost drug utilization across high-acuity dual populations. MAPD margin recovery was slower than expected and the traditional MAPD product will be exited for 2027.
• Marketplace was most strained with MCR of 99%, up from 83.3%, as utilization ran elevated across most categories, especially behavioral health, high-cost drugs, and professional outpatient visits, compounded by prior provider claims settlements.
• For FY26, MOH is shrinking Marketplace exposure to stabilize margins amid a volatile risk pool, guiding to roughly a 50% decline in Marketplace premium as it reprices and lets membership roll down.
• The guidance signals the rate-trend mismatch persists, with Medicaid rates around 4% that do not offset medical cost trend around 5%, plus added pressure from ongoing California items and startup drag from the Florida CMS contract.
• Management sees potential upside levers, including improved Medicaid rates through on and off-cycle adjustments, and Medicare/Marketplace landing better than conservative assumptions as Medicare products mature and the Marketplace book is resized and repriced.

Briefing.com Analyst Insight

This was a tough finish to FY25, and the FY26 outlook suggests these pressures are still persisting, driving a sharp reversal in the stock. The core issue remains the mismatch between Medicaid rates and medical cost trend, which management again characterized as an underfunded environment across the industry. Management said the Florida CMS impact is about $1.50/share and MAPD underperformance is roughly $1.00/share. Stripping that out implies FY26 EPS closer to $7.50, still below expectations and highlighting ongoing trend pressure. There were a few relative bright spots, including commentary that excluding the retroactive California items, Medicaid performance was closer to plan, and that the Florida CMS win reinforces MOH's growth initiatives with continued success winning renewal and new RFP awards. Even so, the magnitude of the guidance miss and sustained trend pressure are weighing heavily on sentiment.