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(Sharecast News) - Shares in Molina Healthcare plunged on Friday after the US managed care group reported an unexpected fourth-quarter loss and issued sharply weaker-than-expected guidance for 2026, triggering a sell-off that drove the stock to a near six-year low.
Molina posted an adjusted loss of $2.75 per share for the fourth quarter, compared with market expectations for a profit of 34cents, as medical costs surged across its Medicaid, Medicare Advantage and Affordable Care Act Marketplace businesses.
Revenue rose 8.3% year-on-year to $11.38bn, beating forecasts, but profitability was hit by roughly $2 per share in adverse retroactive premium adjustments linked to its California Medicaid operations.
The group's consolidated medical care ratio deteriorated to 94.6% from 90.2% a year earlier.
Cost pressures were particularly acute in Molina's Marketplace and Medicare Advantage segments, where medical loss ratios climbed well above expectations, reflecting higher utilisation and weaker risk pools.
Management also flagged a steep contraction in Affordable Care Act Marketplace membership, forecasting a fall to about 220,000 members by the end of 2026 from more than 700,000 in late 2025, as the company exits counties, raises premiums and grapples with the expiry of enhanced federal subsidies.
The outlook for 2026 further unsettled investors.
Molina forecast adjusted earnings of at least $5.00 per share on revenue of at least $44.5bn, far below analyst expectations.
The company said guidance incorporates around $2.50 per share of headwinds, including costs associated with a new Florida Medicaid contract and ongoing losses in traditional Medicare Advantage Part D plans, which it intended to exit in 2027.
Chief executive Joseph Zubretsky described 2026 as a potential "trough year" for Medicaid margins as rates lag underlying cost trends.
Analysts reacted cautiously - Bank of America reiterated an underperform rating, citing limited visibility on Medicaid and exchange risk pools, while Jefferies questioned whether Medicaid margins would stabilise as quickly as management expects.
At 1218 ET (1718 GMT), shares in Molina Healthcare were down 27.92% at $127.50.
Reporting by Josh White for Sharecast.com.