Morgan Stanley Sees Challenges Ahead For Molina Healthcare, Inc.

In a report published Friday, Morgan Stanley analyst Andrew Schenker reiterated an Equal-Weight rating on

. In the report, Morgan Stanley noted, “ While MOH did not outright lower its initial 2014 EPS guidance of $1.65 to $2.15, there are a number of elements that will add pressure to its achievability and increase the seasonality and ramp to 4Q. Notably, MOH has yet to recognize the bulk of the $35M in quality revenue payments from Texas, which represented a $0.12 drag on earnings in 1H14. MOH now believes it can recognize this payment in 4Q instead of 3Q. Additionally, five states, including Texas, have not committed to covering the industry fee, which could also be a drag on earnings if not resolved by 4Q. Separately, an $11M net payment made to the state of Washington will lower 3Q EPS by ~$0.12. Finally, the interest on recently issued convertible senior notes will also effectively lower the 2014 outlook by a few cents.” Molina Healthcare, Inc. closed on Thursday at $45.25.