Magellan Health announced its 2015 financial guidance Tuesday, telling investors it is poised for solid growth that includes revenue improving by just less than 20%.
The Avon, Conn.-based healthcare management company is projecting net revenue of $4.25 billion to $4.9 billion in the year ahead, up from a range of $3.6 billion to $3.8 billion expected in 2014. If achieved, it would be the first time in Magellan Health's 45-year history that the company has reported annual revenue greater than $4 billion.
Other key numbers for 2015 projected Tuesday include net income of $51 million to $67 million and diluted earnings per share of $1.90 to $2.50. Previous 2014 guidance, updated in October for the year that ends Dec. 31, is for net income of $63 million to $77 million and diluted earnings per share of $2.30 to $2.81.
The company is assuming fewer shares outstanding for 2015 as the result of two share repurchase programs. Magellan Health has already completed one—a $300 million share repurchase authorization—and has begun a new, two-year $200 million program that will run through October 2016. Through the new program, as of Dec. 15, Magellan Health had already repurchased approximately 117,000 shares at a total cost of $7.2 million.
For those who have been following Magellan Health's financial performance, it should come as little surprise that even as revenue is expected to climb and fewer shares of stock will be outstanding, diluted earnings per share are actually projected to drop next year. The company has seen its net income plummet in recent quarters even as revenue rose. Rising expenses related to the costs of care, as well as a higher tax rate resulting from the health insurance fee outlined in the Patient Protection and Affordable Care Act, have stripped the company of its revenue gains.
The March 31 loss of a major behavioral health management contract with Maricopa County in Arizona also put pressure on Magellan Health's results. The contract, which covered services for 680,000 people, generated net revenue of $755 million in 2013.
But management seemed optimistic Tuesday, particularly thanks to growth in its clinical consulting and pharmacy-benefit management services, which have expanded as the result of several recent acquisitions.
“We've made great progress this year on our plan for growth,” Magellan Health Chairman and CEO Barry Smith said in the document filed with the Securities and Exchange Commission. “We will continue to solidify our leadership position in population health management in the coming years across our behavioral health, pharmacy and specialty solutions businesses.”
Follow Rachel Landen on Twitter: @MHrlanden