Why Is Magellan Health (MGLN) Down 32.8% Since Last Earnings Report?

Zacks Equity Research

It has been about a month since the last earnings report for Magellan Health (MGLN). Shares have lost about 32.8% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Magellan Health due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Magellan Health Q4 Earnings Beat Estimates, Rise Y/Y

Magellan Health’s fourth-quarter 2019 earnings per share of $1.24 beat the Zacks Consensus Estimate by 29.2%. Moreover, the bottom line came in against the year-ago reported loss of 77 cents per share.

Revenues of $1.81 billion were down 2.3% year over year due to lower contribution from Managed Care and other. However, the top line beat the Zacks Consensus Estimate by 0.5%.

Segment profit of the company soared 354.4% year over year.Total costs and expenses rose 5.6% year over year due to higher cost of goods sold, and depreciation and amortization.

Full-Year Highlights

For 2019, net revenues came in at $7.3 billion, up 2.2% year over year. Adjusted net income for the year was $91.7 per share, surging 48.7% year over year.

Segmental profit increased 10.8% year over year to $252.7 million. This upside can be attributable to solid contributions by Healthcare segment and Pharmacy Management segment.

For the entire year, unrestricted cash and investments totaled $195.4 million, up 49.8% from the level at 2018 end.

Capital Position

Cash flow from operations for the year ended 2019 was $164.8 million, up 42.3% year over year.

As of Dec 31, 2019, the company's cash and cash equivalents totaled $272.3 million, down 16.3% from the level on Dec 31, 2018.

As of Dec 31 2019, total assets of the company dipped 3.7% to $2.9 billion from the figure at 2018 end.

Total stockholder's equity decreased 8% year over year to $1.3 billion at 2019 end.

2020 Guidance

For 2020, the company expects its net revenues in the band of $7-$7.4 million. While adjusted net income is anticipated in the range of $83-$103 million, segment profit for the full year is projected from $250 million to $280 million.

 

How Have Estimates Been Moving Since Then?

Estimates review followed a downward path over the past two months. The consensus estimate has shifted -15.32% due to these changes.

VGM Scores

At this time, Magellan Health has an average Growth Score of C, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Magellan Health has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.



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