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Change Healthcare (CHNG) Up 8.3% Since Last Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for Change Healthcare (CHNG - Free Report) . Shares have added about 8.3% in that time frame, outperforming the S&P 500.

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

Change Healthcare Q1 Earnings and Revenues Beat Estimates

Change Healthcare Inc. reported first-quarter fiscal 2021 adjusted earnings per share of 25 cents, which beat the Zacks Consensus Estimate by 66.7%. However, the bottom line declined 55.4% year over year.

Revenue Details

Revenues declined 18.9% from the prior-year period to $694.2 million in the reported quarter. However, the top line surpassed the Zacks Consensus Estimate by 7.3%.

Segmental Analysis

Change Healthcare operates through three segments — Software and Analytics, Network Solutions, and Technology-Enabled Services.

Software and Analytics

Revenues at this segment totaled $391.6 million, down 9.7% on a year-over-year basis.

Network Solutions

Revenues at this segment were $142.8 million, up 0.9% year over year.

Technology-Enabled Services

Revenues at this segment came in at $187.7 million, down 24.2% year over year.

Margin Analysis

Total operating expenses were $701.9 million, down 0.2% from the prior-year quarter.

In the quarter under review, Change Healthcare reported operating loss of $7.7 million, against the year-ago operating income of $152.3 million.

Financial Position

The company exited the quarter with cash and cash equivalents of $178.4 million compared with $410.4 million in the preceding quarter.

Cash used in operating activities at the end of first-quarter fiscal 2021 amounted to $169.1 million compared with cash flow from operating activities of $84.5 million in the year-ago period.

Guidance

Due to uncertainty surrounding the COVID-19 pandemic, Change Healthcare has only issued quarterly guidance.

For second-quarter fiscal 2021, the company projects Solutions revenues between $670 million and $690 million. The Zacks Consensus Estimate for the same is pegged at $731.7 million.

Adjusted EPS is estimated between 20 cents and 23 cents. The Zacks Consensus Estimate for the same stands at 18 cents.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates revision. The consensus estimate has shifted 34.68% due to these changes.

VGM Scores

At this time, Change Healthcare has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. 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. Notably, Change Healthcare has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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