UBS has downgraded Molina Healthcare, Inc. (NYSE: MOH) to Neutral from Buy after the company's first quarter earnings miss, resulting as much as 18 percent fall in the shares.

Analyst A.J. Rice said the road is "less clear" for the Medicaid provider to achieve its net margin target of 1.5 to 2 percent by the end of 2017. The company's updated guidance calls for a 2016 net margin of 0.7-0.9 percent, down from 1.1 percent in 2015. UBS' earlier Buy thesis was primarily based on this tenet.

Rice was expecting MOH to close the substantial valuation gap that existed between it and Centene Corp (NYSE: CNC). Since Centene announced the acquisition of Health Net, Inc. (NYSE: HNT) last year, "the valuation gap has evaporated, removing an underpinning for MOH shares."

Long Beach, California-based Molina reported first quarter adjusted earnings of $0.51 a share, missing UBS/consensus view of $0.80/$0.81 on higher than expected medical costs in Ohio and Texas and an increase in pharmacy costs, particularly in Puerto Rico.

According to the analyst, most Medicaid MCO earnings misses were driven by unexpected utilization increases or a lack of actuarially sound rates. But in the case of Molina, the company experienced systems overload leading to a "slower ramp-up in care management programs and an unexpected easing of patient prior authorizations for inpatient hospital care in certain key markets."

But, the "silver lining" is the 37 percent growth in total revenue to $4.3 billion, and the focus now shifts to how quickly Molina can resolve these problems.

MOH now expects its 2016 adjusted EPS to be $2.50-$2.95, down from $3.86 previously. The analyst also trimmed 2016 EPS estimate to $2.80 from $3.86 and 2017 EPS view to $3.40 from $4.50. Street sees EPS of $3.86 for 2016 and $4.75 for 2017.

Rice also slashed the price target on the stock to $54 from $76.

Separately, Bank of America has also downgraded Molina Healthcare to Underperform.

Molina shares fell 17 percent to $53.05 on earnings miss and concerns over the company's ability to hit its long-term margin target.