(By Balaseshan) Magellan Health Services Inc. (NASDAQ: MGLN) reported a jump in quarterly earnings on benefit from one-time reversal of tax contingencies as well as strong revenue growth across its segments. The company raised 2012 earnings guidance above Street's view.
Earnings for the third quarter were $66.3 million or $2.36 per share, up from $31.4 million or $1.03 per share last year. The results benefited from the impact of a one-time reversal of tax contingencies, which increased EPS by about $1.24.
Revenue increased 16.2% to $798.4 million.
Analysts, on average, polled by Thomson Reuters had expected a profit of $0.97 per share on revenue of $837.81 million for the third quarter.
Revenue from Commercial jumped 30.5% to $176.71 million, while Public Sector revenue increased 12.5% to $407.27 million. Radiology Benefits Management revenue rose 12% to $88.13 million, while Specialty Pharmaceutical Management revenue climbed 37.6% to $101.50 million. Revenue from Medicaid Administration plunged 30.2% to $40.26 million.
Segment profit grew 25% to $69.4 million, which represents income from operations before stock compensation expense, depreciation and amortization, interest expense, interest income, gain on sale of assets, special charges or benefits, and income taxes.
Given these results, the company is now expecting full year segment profit to be at the upper end of the guidance range of $240 million to $260 million.
Primarily as a result of lower effective tax rate, MGLN raised full year 2012 net income guidance to range of $135 million to $155 million from previous estimate of $91 million to $109 million. The company also lifted EPS outlook to range of $4.83 to $5.55 from previous forecast of $3.25 to $3.89. Street analysts predict EPS of $3.72 for the fiscal 2012.
Looking ahead, after adjusting the current 2012 guidance for about $15 million of favorable year-to-date out-of-period adjustments, the company anticipates seeing solid growth in segment profit in 2013.
This expectation is driven by several factors including the impact of new business and the impact of care management initiatives, primarily in the Commercial behavioral health segment, which will be partially offset by contract terminations, increased investments in Pharmacy and Medicaid strategic initiatives, and continued margin pressure resulting from economic strains on health plan and state clients.
MGLN closed Thursday's regular session at $48.07. The stock has been trading between $40.24 and $56.58 for the past 52 weeks.