Magellan Health (MGLN) Misses Q2 EPS by 31c, Miss on Revenues; Lowers FY18 EPS/Revenue Outlook

Magellan Health (NASDAQ: MGLN) reported Q2 EPS of $0.92, $0.31 worse than the analyst estimate of $1.23. Revenue for the quarter came in at $1.81 billion versus the consensus estimate of $1.88 billion.

Highlights Include:

• Net revenue increased 27.6 percent over the second quarter of 2017 to $1.8 billion.
• Net income increased 146.4 percent over the second quarter of 2017 to $13.6 million.
• Segment profit increased 25.2 percent over the second quarter of 2017 to $68.0 million.
• Adjusted net income increased 65.2 percent from the second quarter of 2017 to $23.3 million.
• Unrestricted cash and investments were $244.4 million as of June 30, 2018. Approximately $115.8 million of the unrestricted cash and investments as of June 30, 2018, is related to excess capital and undistributed earnings held at regulated entities.
• On May 24, 2018, the Company’s board of directors approved an additional $200 million to the current $200 million stock repurchase plan which will now authorize the Company to purchase up to $400 million. The board also extended the end date for an additional two years until October 22, 2020.
• In May, the Company was named to the annual Fortune 500 list of America’s largest corporations by revenue for the first time in the Company’s history.

Outlook

The Company is lowering its 2018 full year earnings guidance.

“We are updating our guidance ranges to reflect the following: the impact of lost contracts and delays in closing on pipeline opportunities in our pharmacy specialty carve-out business; the impact of our continued cost of care pressure in Virginia; and in New York, the impact of lower than expected membership growth as well as lower than anticipated capitation rates, partially offset by improvements in care management,” said Jonathan N. Rubin, chief financial officer of Magellan Health.

The Company now anticipates segment profit in the range of $330 million to $350 million. In addition, the Company expects revenue in the range of $7.3 billion to $7.5 billion, net income in the range of $93 million to $117 million, adjusted net income in the range of $132 million to $152 million, EPS in the range of $3.65 to $4.59 and adjusted EPS in the range of $5.18 to $5.96.

“Compared to the first half of 2018, we expect the segment profit to sequentially increase for the remainder of the year due to the following three factors: earnings seasonality in both our healthcare and pharmacy businesses, margin expansion due to initiatives in our healthcare segment, and new business and same store growth,” said Rubin. “While we expect these items to have a favorable impact in the third quarter, we anticipate a greater impact in the fourth quarter.”

“I am confident in our strategy and optimistic about our continued growth trajectory,” said Barry M. Smith, chairman and chief executive officer of Magellan Health. “2018 will continue to be a year of focused execution for Magellan, and our strategy remains unchanged.”

GUIDANCE:

Magellan Health sees FY2018 revenue of $7.3-7.8 billion, versus the consensus of $7.59 billion.

For earnings history and earnings-related data on Magellan Health (MGLN) click here.

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