Molina Healthcare's 2025 Results Confirm Deepening Earnings Squeeze with Adjusted EPS Below Reduced Guidance

What happened

Molina Healthcare reported fourth-quarter 2025 financial results, posting a GAAP loss per diluted share of $3.15 and an adjusted loss of $2.75, while full-year 2025 adjusted earnings per diluted share came in at $11.03. This figure falls short of the company's already slashed 2025 guidance of approximately $14, highlighting a continued deterioration in profitability. The results underscore persistent medical cost pressures, with the consolidated medical care ratio (MCR) likely remaining elevated above 92%, as previously flagged in the DeepValue report. Management's portrayal of a temporary margin squeeze is challenged by this ongoing underperformance, which aligns with sector-wide utilization headwinds and mispricing risks in ACA Marketplace segments. Consequently, the earnings collapse narrative gains further credence, raising questions about the timing and efficacy of Molina's recovery initiatives.

Implication

The below-guidance 2025 adjusted EPS of $11.03 reinforces the severity of Molina's medical cost challenges, suggesting that rate relief and utilization management efforts have not yet gained traction. This outcome increases the likelihood of the bear scenario outlined in the DeepValue report, where consolidated MCR stays above 92% and EPS remains depressed around $13–$14. Investors must now scrutinize upcoming 2026 guidance for signs of improvement, particularly in MCR trends and ACA Marketplace repricing, before considering any entry. The stock's valuation at ~11.5x trailing EPS offers limited margin of safety if cost pressures persist, potentially driving shares toward the $140 downside target. Therefore, waiting for one to two quarters of demonstrable MCR decline remains the prudent approach, as pre-emptive bets on recovery carry heightened risk amid ongoing volatility.

Thesis delta

The news confirms the core thesis of an earnings squeeze, with actual 2025 performance falling below already reduced guidance, shifting the narrative toward a more prolonged and uncertain recovery path. This increases the probability of the bear scenario where MCR remains elevated and EPS stagnates, though the investment call to wait for clearer MCR improvement and stronger 2026 guidance remains unchanged but now carries higher conviction in the near-term risks.