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HMS Holdings (HMSY) Down 17.4% Since Last Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for HMS Holdings (HMSY - Free Report) . Shares have lost about 17.4% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is HMS Holdings 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 drivers.

HMS Holdings EPS in Line with Estimates in Q2

HMS Holdings Corp’s share price has declined 2.9% as of Aug 12 since the company reported weaker-than-expected results on Aug 7.

The company reported adjusted earnings per share of 19 cents for second-quarter 2020, in line with the Zacks Consensus Estimate. However, the bottom line fell 44.1% from the year-ago quarter.

Revenues of $142.7 million missed the Zacks Consensus Estimate by 7.4%. Also, the top line dropped 15.2% on a year-over-year basis.

Q2 Segmental Analysis by Product

Payment Integrity (“PI”) revenues amounted to $24.4 million, down 50.3% year over year.

Population Health Management (“PHM”) revenues totaled $11.5 million in the quarter under review, down 17.6% on a year-over-year basis.
 
Revenues at the Coordination of Benefits (“COB”) segment amounted to $106.7 million in the second quarter, up 1.6% year over year.Organic COB revenues, excluding Accent, fell 8.8% owing to lower claim volumes resulting from the impact of the COVID-19 pandemic.

Margin Analysis

Gross profit came in at $32.4 million, down 52.8% from the prior-year quarter. Gross margin was 22.7% of net revenues, down 1807 basis points (bps) year over year.

Operating profit in the second quarter was $5.6 million, down 86.1% from the year-ago quarter. Operating margin was 3.9%, down 2017 bps from the prior-year quarter.

Financial Update

The company exited the second quarter with cash and cash equivalents of $193.1, up from $148 million at the end of first quarter.

Cumulative net cash provided by operating activities at the end of the second quarter came in at $65.8 million, compared with $78.1 million in the year-ago period.

2020 Guidance Updated

The company has revised its 2020 guidance.

For 2020, the company anticipates revenues between $680 million and $690 million, indicating growth of 10.5-12.1% from the year-ago figure. The Zacks Consensus Estimate for the same is pegged at $681.8 million.

Net income is expected in the band of $66-$74 million. The range reflects a decline of 4.3% to an increase of 7.2% from the year-ago period.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision.

VGM Scores

At this time, HMS Holdings has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Charting a somewhat similar path, 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 A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions looks promising. Notably, HMS Holdings has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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