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Molina shares rise sharply after analyst upgrade, margin guidance change

Shares of Molina Healthcare Inc. rose for a second consecutive day on Jan. 8 after an analyst upgraded the company on its improving margin outlook and confidence in management.

Shares rose about 7.4% on Jan. 7. As of 3:20 p.m. ET, Molina shares were up 8.60% at $127.88.

MUFG Securities analyst Jason Twizell upgraded Molina to "overweight" from "neutral." Molina said at a Jan. 7 conference that it increased its pretax margin improvement guidance to a range of $700 million to $800 million, up from the previously expected $500 million to $600 million. Of this, $200 million has been realized, with $140 million in medical cost management and $30 million each from administrative savings and at-risk revenue contracts.

"We believe MOH has the right team in place to generate sustainable Medicaid pretax margins that are in-line with its peers," Twizell wrote.

The analyst also noted that Molina is looking to continue growth in products and geographies adjacent to recent successful contract wins in Washington, Puerto Rico and Mississippi.

Twizell raised his 2019 adjusted EPS estimate on Molina to $9.35 from $7.05 and the price target to $142 from $135.

Molina shares have taken big hits in recent months. After a federal judge ruled the Affordable Care Act unconstitutional, its stock fell to $120 from $131.72 on Dec. 17, 2018, eventually touching a low of $105.90 on Jan. 3.