Healthcare Dominoes Tumble: Molina Slashes Profit Outlook, Echoing Centene’s Warning on Soaring Medical Costs
The managed-care sector is facing a wave of financial pressure as Molina Healthcare becomes the latest major insurer to cut its earnings forecast, citing the same rising medical costs that recently rocked competitor Centene.
LONG BEACH, CA – The health insurance industry is on high alert as Molina Healthcare Inc. (MOH) confirmed on Monday what investors had feared: rising medical-cost pressures are taking a significant toll on profits. The company slashed its full-year earnings guidance, joining a chorus of warnings from sector giants like Centene Corp. (CNC) and UnitedHealth, signaling a challenging period for managed healthcare.
The announcement sent a new wave of uncertainty through the market, though the impact was somewhat muted after last week’s sector-wide sell-off. While Molina’s stock saw a premarket bump, it fell 1.4% in afternoon trading, compounding a painful 19.4% tumble last week that came in direct response to Centene’s troubles.
The Numbers Behind the Warning
Molina’s revised forecast paints a clear picture of the financial strain. The company now expects:
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Adjusted quarterly earnings of approximately $5.50 per share, which it described as “modestly below” prior expectations and well under the FactSet analyst consensus of $6.20 per share.
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Full-year adjusted earnings to land between $21.50 and $22.50 per share, a steep drop from its previous guidance of at least $24.50 per share.
In a statement, Molina confirmed the headwinds are widespread, with medical-cost pressures affecting all three of its business lines and expected to persist through the second half of the year.
A Sector-Wide Squeeze
Molina’s announcement is not an isolated event but rather the latest domino to fall in the managed-care industry. Just last week, Centene Corp. sent shockwaves through the market by pulling its full-year guidance. Centene cited a combination of higher-than-anticipated medical costs in its Medicaid business and weaker-than-expected growth in health-exchange marketplaces across 22 states.
The fallout from Centene’s news was immediate and brutal. Its stock plummeted a record 40.4% on July 2, while Molina’s stock was dragged down with it, suffering its biggest one-day selloff in 13 years with a 22% dive.
Leadership’s Perspective: A “Temporary Dislocation”?
Despite the grim short-term numbers, Molina Healthcare’s leadership sought to reassure investors about the company’s long-term stability.
“The short-term 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 Molina’s Chief Executive, Joseph Zubretsky. He emphasized that the company’s fundamental long-term outlook remains unchanged.
Wall Street Reacts: Better Than Feared?
For some analysts, Molina’s guidance cut, while disappointing, was not the worst-case scenario. Ann Hynes, an analyst at Mizuho Securities, noted in a client memo that the revision could have been more severe.
“Given the stock was down 22% last week after [Centene] withdrew guidance… we view [Molina’s] guidance reduction as better-than-feared,” Hynes wrote. She suggested that while the current environment is challenging, insurance premium rates should eventually adjust to cover the elevated cost trends.
The market performance tells the story of a difficult year. Through Monday, Molina’s shares have fallen 18.8% in 2025, while Centene’s stock has been crushed, tumbling 45.1%. In stark contrast, the broader S&P 500 index has gained 6.2% over the same period, highlighting the intense, sector-specific pressure facing health insurers.
