UPDATE: Morgan Stanley Initiates Coverage on Molina Healthcare with Equal-Weight Rating on Earnings Drivers, Execution Risk

In a report published Thursday, Morgan Stanley analyst Andrew Schenker initiated coverage on

with an Equal-Weight rating. In the report, Morgan Stanley noted, “Medicaid and the Duals will be among the largest revenue and earnings drivers for the MCOs. However, execution risk will be high in the early years as new members enroll with no previous coverage experience. MOH is the most challenged to fund the minimum statutory minimums required by state regulators and therefore may be have to do a dilutive capital raise to fund growth. The current ~27.6x P/E assigned MOH shares is six multiple points above the 3-year average P/E of 21.1x carried by MOH, reflecting its presence in states likely to move first on Duals.” Molina Healthcare closed on Wednesday at $31.49.