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LHC Group (LHCG) Q3 Earnings and Revenues Beat Estimates

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LHC Group, Inc.’s third-quarter 2020 adjusted earnings per share (EPS) of $1.63 surpassed the Zacks Consensus Estimate of $1.32 by 23.5%. Moreover, the bottom line improved 29.4% year over year.

The company reported net service revenues of $530.7 million in the quarter, which beat the Zacks Consensus Estimate by 1.5%. Further, the top line inched up 0.4% on a year-over-year basis.

Q3 Highlights

In the quarter under review, total organic growth in home health admissions rose 4.7% year over year, while organic growth in hospice admissions climbed 12.8%.

However, home health service revenues were $373.5 million, down 0.6% year over year. Meanwhile, hospice services revenues amounted to $59.8 million, up 3.6%.

Business Update

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 this joint venture (JV) to account for almost $3.5 million in incremental annualized revenues.

LHC Group, Inc. Price, Consensus and EPS Surprise

LHC Group, Inc. Price, Consensus and EPS Surprise

LHC Group, Inc. price-consensus-eps-surprise-chart | LHC Group, Inc. Quote

On Oct 1, 2020, the company finalized a JV with University Health Care System to bolster home health and hospice services in Georgia and South Carolina. The company expects this joint venture to account for almost $8.3 million in incremental annualized revenues. In the same month, the company finalized a JV with Northeast Georgia Health System in order to share ownership of SunCrest Home Health in Gainesville, GA.

On Nov 1, 2020, LHC Group finalized an expansion of JV with CHRISTUS Health via an agreement of adding a hospice provider in San Marcos, TX. The company anticipates this joint venture to account for almost $2.1 million in incremental annualized revenues.

Margin Analysis

Gross profit in the quarter totaled $225.4 million, up 16.4%. Gross margin in the reported quarter was 42.5%, which expanded 580 basis points (bps) on a year-over-year basis.

Operating profit was $19.5 million, plunged 58.2% from the prior-year quarter. Operating margin was 3.7%, down 510 bps.

2020 Guidance Raised

LHC Group is raising its full-year 2020 guidance (that was withdrawn on May 7,2020) and then reinstated on Aug 5, 2020.

For full-year 2020, the company projects net service revenues between $2.06 and $2.07 billion (up from the previously guided range of $2 billion to $2.05 billion). The Zacks Consensus Estimate for the same is pegged at $2.06 billion.

Adjusted EPS is expected in the range of $4.90-$5.00 (up from the prior issued ranged of $4.60-$4.80). The consensus mark for the same is pegged at $4.76 per share.

Wrapping Up

LHC Group exited the third quarter on a strong note. The company continues to gain from home health and hospice admissions with both witnessing organic growth on a year-over-year basis. Increase in the bottom line buoys optimism. LHC Group is also anticipated to benefit from JVs. Expansion is gross margin is encouraging.

However, the company witnessed decline in home health service revenues in the quarter under review. Also, contraction in operating margin raises concern. Further, a highly competitive home healthcare market remains a woe.

Zacks Rank

LHC Group carries a Zacks Rank #3 (Hold).

Earnings of Other MedTech Majors at a Glance

Some better-ranked stocks in the broader medical space that have already announced their quarterly results are Thermo Fisher Scientific Inc. (TMO - Free Report) , Align Technology, Inc. (ALGN - Free Report) and AngioDynamics, Inc. (ANGO - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Align Technology reported third-quarter 2020 adjusted EPS of $2.25, which surpassed the Zacks Consensus Estimate by 281.4%. Revenues of $734.1 million outpaced the consensus mark by 38%.

Thermo Fisher reported third-quarter 2020 adjusted EPS of $5.63, beating the Zacks Consensus Estimate by 28.8%. Revenues of $8.52 billion surpassed the consensus mark by 10%.

AngioDynamics reported first-quarter fiscal 2021 adjusted earnings per share (EPS) of 2 cents against the Zacks Consensus Estimate of a loss per share of 6 cents. Revenues of $70.2 million beat the consensus mark by 6.9%.

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