Molina Healthcare Inc. shares tumbled 10% on Thursday after the company cut its full-year earnings guidance for the second time this month, citing unexpectedly high medical costs.
The revised outlook and weaker-than-expected quarterly earnings triggered a sharp selloff, with the stock falling as much as 10% to its lowest level since September 2020.
Earnings miss and guidance cut spark investor concerns
The managed care company reported adjusted earnings of $5.48 per share for the second quarter of 2025, missing analysts’ expectations of $5.82.
Despite revenue rising 15% year-over-year to $11.43 billion—beating consensus estimates of $10.94 billion—profitability was hit by rising medical expenses.
Molina now expects adjusted full-year earnings of no less than $19 per share, a significant downgrade from the July 7 guidance of $21.50 to $22.50 per share.
That earlier estimate was itself a revision from the previous forecast of at least $24.50 per share.
The new projection also falls well below the analyst consensus of $22.53.
“The current earnings pressure we are experiencing results from what we believe to be a temporary dislocation between premium rates and medical cost trend which has recently accelerated,” said President and Chief Executive Officer Joseph Zubretsky. “We are still performing near our long-term target ranges, and nothing has changed our outlook for the long-term performance of the business.”
Medical costs pressure margins across segments
The company’s medical care ratio (MCR)—a key measure of medical costs as a percentage of premium revenue—worsened to 90.4% in the quarter, up from 88.6% a year ago.
This rise indicates that a greater portion of premiums is being used to pay medical claims, squeezing margins.
Cost pressures were most pronounced in the Medicare segment, where the MCR jumped to 90.0% from 84.9% in the same quarter last year.
The Marketplace segment also saw a sharp rise in its MCR to 85.4%, compared to 71.6% a year earlier.
Molina attributed the increase to higher utilization rates, particularly among high-acuity members, as well as cost inflation in behavioral health services, specialty drugs, and inpatient and outpatient care.
Zubretsky acknowledged on a call with analysts that while Molina understands the sources of the rising costs, the broader health insurance industry is still grappling with the reasons behind them.
“We have our arms around the what,” he said. “I think the industry generally doesn’t have their arms around the why.”
Membership growth continues despite Medicaid headwinds
Despite the earnings disappointment, Molina reported continued growth in its member base.
As of June 30, 2025, the company served approximately 5.7 million members, an increase of 167,000 from the same period a year ago.
Growth was driven by new contracts, acquisitions, and expansion within its existing service areas, although some of the gains were offset by the ongoing Medicaid redetermination process that began in 2024.
Molina reaffirmed its full-year premium revenue forecast of approximately $42 billion, suggesting that top-line growth remains on track.
However, with earnings under pressure and guidance lowered, investors are likely to remain cautious until medical cost trends show signs of stabilization.
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