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What happened Shares of Molina Healthcare (NYSE: MOH) rose over 18% today after the company reported second-quarter 2018 results. The managed care leader delivered another solid quarter of operations as it continued to slim down, improve efficiency, and reduce debt. While revenue fell 2.5% compared to the year-ago period, net income jumped to $202 million, compared to a year-ago net loss of $230 million. Total debt has declined by $493 million since the beginning of the year. Solid progress in the first half of 2018 prompted management to raise its full-year 2018 guidance for the second straight quarter. Raising guidance might be an understatement. Molina Healthcare now expects approximately $477 million in net income at the midpoint. Original guidance called for just $219 million in net income for all of 2018 -- a number nearly surpassed in the most recent quarter. As of 12:53 p.m. EDT, the stock had settled to a 17.3% gain. A woman checking her phone and pumping her fist as money falls around her. Image source: Getty Images. So what The incredible leap observed in full-year 2018 earnings guidance is being driven by sharp improvements in membership for both the marketplace and non-marketplace (Medicaid and Medicare) businesses and decreased cost ratios for each. Consider several selected highlights from Molina Healthcares original guidance and the most recent expectations provided: Metric Original Guidance (February) Current Guidance (July) Total revenue $18.8 billion $18.8 billion Medical care costs $15.6 billion $15.2 billion Net income $219 million (midpoint) $477.5 million (midpoint) EBITDA $654 million (midpoint) $976.5 million (midpoint) End-of-year membership, marketplace 303,000 354,000 End-of-year membership, non-marketplace 3,738,000 3,569,000 Source: Company press release. Considering the business brings in nearly $19 billion in revenue per year, even small changes of a few percentage points can have huge effects on the bottom line. Thats what investors are seeing play out when comparing the original guidance to the latest expectations. Now what Molina Healthcares strategy to revamp the business and navigate the uncertainties facing the managed care industry has proven remarkably effective so far. Judging from the more than doubling of earnings guidance for full-year 2018, even management seems to be surprised at the companys good fortune. If the company can continue to boost profits, divest noncore assets, and pay down debt, then it should be able to continue rewarding shareholders for the long haul. Story continues More From The Motley Fool 10 Best Stocks to Buy Today 3 Stocks That Are Absurdly Cheap Right Now 5 Warren Buffett Principles to Remember in a Volatile Stock Market The $16,728 Social Security Bonus You Cannot Afford to Miss The Must-Read Trump Quote on Social Security 10 Reasons Why Im Selling All of My Apple Stock Maxx Chatsko has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy . View comments
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