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Why Is LHC (LHCG) Down 1.6% Since Last Earnings Report?

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It has been about a month since the last earnings report for LHC Group (LHCG - Free Report) . Shares have lost about 1.6% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is LHC due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

LHC Group Q2 Earnings Beat Estimates, Revenues Miss

LHC Group, Inc.’s second-quarter 2020 adjusted earnings per share of $1.23 surpassed the Zacks Consensus Estimate of 75 cents by 64%. Moreover, the bottom line improved 14.9% year over year.

The company reported net service revenues of $487.3 million in the quarter, which missed the Zacks Consensus Estimate by 1.1%. Further, the top line declined 5.9% on a year-over-year basis.

Q2 Highlights

In the quarter under review, total organic growth in home health admissions fell 4.7% year over year due to the impact of the COVID-19 pandemic, while organic growth in hospice admissions climbed 1.8%. Home health service revenues were $339.9 million, down 9.4% year over year, while hospice services revenues amounted to $61.1 million, up 10.9%.

On Aug 1, 2020, LHC Group finalized a joint venture with Orlando Health to boost home health and home and community based services (HCBS) in the state of Florida. The company anticipates that this joint venture will account for almost $3.5 million in incremental annualized revenues.

Margin Analysis

Gross profit in the quarter totaled $180.6 million, down 5.9%. Gross margin in the reported quarter was 37.1%, which remained flat on a year-over-year basis.

Operating profit came in at $73.9 million, up 74.3% from the prior-year quarter. Operating margin was 15.2%, up 700 basis points (bps).

2020 Guidance

Due to the uncertainty regarding the impact and disruption caused by COVID-19, the company withdrew its 2020 guidance during the first quarter. However, the company has decided to reinstate full-year 2020 guidance during the quarter under review.

For full-year 2020, the company projects net service revenues between $2 billion and $2.05 billion. The Zacks Consensus Estimate for the same is pegged at $2.11 billion.

Adjusted EPS is expected in the range of $4.60-$4.80. The consensus mark for the same is pegged at $4.26 per share.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted 6.4% due to these changes.

VGM Scores

Currently, LHC has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. Following the exact same course, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise LHC has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.


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