Molina Healthcare (MOH): 3Q26 results largely in line; Focus remains on 2027; Maintain UW

We are maintaining our Underweight recommendation on MOH and the entire structure. Premium revenue and MCR across all segments were in line with expectations, and cost trends appear to remain elevated but stable across the industry, indicating that current margins may have troughed. Management reiterated its prior FY26 guidance, but we are more interested in FY27 commentary: premium revenue of at least $45bn, with January 1 renewal rates of ~7% on 55% of FY27 premium and overall 2027 rate increases of approximately 6%, largely offset by medical cost trend of 5.5%-6%. The FL CMS contract remains an earnings drag (management expects a 99% MCR in 4Q26) and requires meaningful improvement in FY27 to neutralize, while work requirements and semi-annual reverifications could drive a cumulative 9%-10% membership loss over the next few years. With MOH bonds trading less than 30bp wide to CNC and only 70bp inside of the BB index, we see very few compelling reasons to own MOH bonds at current lev