MOH
POSTURE CHANGE: Every Signal Worsened — Upgraded to AVOID
Q4 2025 earnings revealed catastrophic deterioration: FY2026 EPS guided to $5.00 (down 64% from prior year, 80% from FY2024 peak). California retroactive premium clawback (-$2.00/share) introduces new precedent risk. Revenue Durability debate resolved — both lenses now FRAGILE. Management credibility impaired after 21% FY2025 guidance miss. Stock down 35% to ~$118.
Read the full analysisAnnual report and 8-K filings reviewed — all signals confirmed at higher confidence
We incorporated the FY2025 10-K (filed Feb 10), plus 8-Ks disclosing a credit covenant amendment (interest coverage reduced from 3.0x to 1.75x through 2026), a $93M intangible impairment from the MAPD exit, and $850M in new senior notes at 6.5%. The 10-K also revealed negative operating cash flow of $(535M), planned 66% Marketplace membership contraction, and the first official OBBBA quantification (15-20% Expansion reduction by 2029). No signal labels changed, but confidence levels increased across all lenses.
"Can a pure-play government healthcare company thrive in a contractionary policy environment?"
Molina Healthcare derives 100% of its $38.6B revenue from government programs — Medicaid (79%), Medicare (14%), and ACA Marketplace (6.5%). Q4 2025 earnings revealed a catastrophic deterioration: FY2026 EPS guidance of ≥$5.00 (vs $14.00 prior year), a Q4 GAAP loss of $3.15/share, and a California retroactive premium adjustment costing $2.00/share. Four AI models analyzed these results through 3 distinct analytical lenses, finding every signal worsened and none improved.
Executive Summary
Cross-lens roll-up assessment
Molina Healthcare's Q4 2025 earnings revealed catastrophic deterioration across all metrics. FY2026 EPS guidance of ≥$5.00 represents an 80% decline from FY2024 peak of $24.50 and 64% below prior year. A California retroactive premium adjustment ($2.00/share — 40% of guided EPS from a single state action), MAPD exit costs ($1.00/share), and Florida implementation costs ($1.50/share) compound ongoing Medicaid margin compression at 2.5% vs 4.5% target. Every signal worsened; none improved. The CONDITIONAL vs FRAGILE revenue durability debate is now resolved — both lenses classify revenue as FRAGILE.
Q4 2025 earnings confirm structural business model impairment from regulatory dynamics. Every signal worsened, none improved. FY2026 guidance of $5.00 EPS (vs $24.50 two years prior) reflects 80% earnings destruction. California retroactive clawback introduces a new risk dimension — retrospective regulatory action that companies cannot adapt to. Management credibility is impaired after a 21% miss on FY2025 guidance. The revenue durability debate is resolved: both lenses now classify revenue as FRAGILE. This is not a cyclical trough — it is structural margin impairment driven by regulatory rate-setting.
Key Takeaways
- •FY2026 EPS guidance: ≥$5.00 vs $14.00 prior year (64% decline) and $24.50 FY2024 peak (80% decline) — stock fell 35% to ~$118
- •California retroactive premium adjustment: -$2.00/share (40% of FY2026 guided EPS from single state action) — introduces precedent risk for other states
- •Revenue Durability debate RESOLVED: Both Gravy Gauge and Regulatory Reader now classify as FRAGILE — margin compression ($24.50→$14→$5) is not cyclical
- •FY2025 actual EPS: $11.03 vs $14.00 guidance (21% miss) — destroys management credibility for FY2026 $5.00 guidance
- •Only positive: Marketplace MCR improved 500bps to 90.6% and membership growing to 5.6-5.8M — but overwhelmed by Medicaid deterioration
- •CEO sold $28M at ~$320 (April 2025), stock now ~$118 (63% peak-to-trough); no insider buying at current levels despite COO's earlier $1.56M purchase at $156
- •10-K filing confirms: operating cash flow negative $(535M), credit covenant amended from 3.0x to 1.75x interest coverage, Marketplace planned to contract 66% (655K to 220K members), OBBBA to reduce Medicaid Expansion by 15-20% by 2029
Key Tensions
- •Management calls FY2026 a 'trough year' with 2027 recovery — but states have NOT restored rates in 18+ months and management missed FY2025 guidance by 21%
- •California retroactive clawback: management says 'one-time' but provides no evidence other states cannot replicate — precedent risk is material
- •Regulatory exposure: Gravy Gauge says ELEVATED (captured in concentration), Regulatory Reader says EXISTENTIAL (retrospective clawback + approaching OBBBA + no management disclosure)
Gravy Gauge
Is this revenue durable?
Key Metrics
Key FindingsClick to expand details
Signal AssessmentsClick for full context
| Signal | Scale | Assessment | Evidence |
|---|---|---|---|
Revenue Durability | FRAGILE | 3Triangulated | |
Regulatory Exposure | ELEVATED | 3Triangulated | |
Customer Concentration | — | CRITICAL | 2Corroborated |
Constraint Timeline | — | RAPID/GRADUAL | 3Triangulated |
Management Mitigation | — | MIXED | 2Corroborated |
Model Debates
Cross-Lens Insights
Where Lenses Agree
- Regulatory Exposure is ELEVATED across all lenses
- State Concentration Creates Material Single-Event Risk
- 2025 Policy Shift is Real and Already Impacting Results
- Margin Compression is Current, Not Hypothetical
- Revenue Durability FRAGILE — Cross-Lens Agreement (NEW)
Where Lenses Differ
Revenue Durability
This conflict is now RESOLVED. Q4 2025 earnings caused Gravy Gauge to upgrade from CONDITIONAL to FRAGILE, matching Regulatory Reader's prior assessment. The 'margin risk vs elimination risk' distinction became academic when margins compressed 80% in two years.
Regulatory Exposure
Both lenses agree CA retroactive adjustment is material — they classify it differently based on lens focus. Gravy Gauge captures it as concentration risk (single state = 40% of guided EPS). Regulatory Reader captures it as a qualitatively new regulatory risk (retrospective clawback).
The following publicly available documents were collected and extracted into a structured fact dossier that powered this analysis.
SEC Filing
- Annual Report (10-K) — FY2024
- Quarterly Report (10-Q) — Q3 2025
- Quarterly Report (10-Q) — Q2 2025
- Current Report (8-K) — Q4 2025 Earnings Release (Feb 5, 2026)
- Annual Report (10-K) — FY2025 (filed Feb 10, 2026)
- Current Report (8-K) — Credit Covenant Amendment & $93M Impairment (Feb 6, 2026)
- Current Report (8-K) — $850M Senior Notes & New Credit Facility (Nov 20, 2025)
- Form 4 Insider Transactions — CEO, COO (2024–2025)
Earnings Transcript
- Q3 2025 Earnings Call Transcript
- Q4 2025 / FY2025 Earnings Call Transcript
Research Document
- OBBBA Legislative Analysis — Medicaid & Marketplace Provisions
- CMS Marketplace Program Integrity & Affordability Rule (June 2025)
Web Source
- S&P / Moody's Credit Rating Commentary