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HMS Holdings (HMSY) Climbs 7.4% Post In-Line Q3 Earnings
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HMS Holdings Corp’s share price rallied 7.4% on Nov 6 following the release of third-quarter 2020 results.
The company reported adjusted earnings per share (EPS) of 30 cents for third-quarter 2020, in line with the Zacks Consensus Estimate. However, the bottom line rose 20% from the year-ago quarter.
Revenues of $165.2 million missed the Zacks Consensus Estimate by 3.4%. However, the top line rose 12.5% on a year-over-year basis.
Q3 Segmental Analysis by Product
Payment Integrity (“PI”) revenues amounted to $38 million, up 2.6% year over year.
Population Health Management (“PHM”) revenues totaled $13.4 million in the quarter under review, down 11.9% on a year-over-year basis.
Revenues at the Coordination of Benefits (“COB”) segment amounted to $113.9 million in the third quarter, up 20.3% year over year. Organic COB revenues, excluding Accent, rose 9% to $103.1 million.
Margin Analysis
Gross profit came in at $53.4 million, up 17.9% from the prior-year quarter. Gross margin was 32.3% of net revenues, up 149 basis points (bps) year over year.
Operating costs came in at $26.2 million, down 7.1%.
Operating profit in the third quarter was $27.2 million, up 59.4% from the year-ago quarter. Operating margin was 16.5%, up 484 bps from the prior-year quarter.
HMS Holdings Corp Price, Consensus and EPS Surprise
The company exited the third quarter with cash and cash equivalents of $211 million, up from $193.1 million at the end of the second quarter.
Cumulative net cash provided by operating activities at the end of the third quarter totaled $92.9 million, compared with $112.9 million a year ago.
2020 Guidance
The company has reaffirmed its 2020 guidance.
For 2020, the company reaffirmed revenue guidance at $680-$690 million, indicating growth of 10.5-12.1% from the year-ago figure. The Zacks Consensus Estimate for the same is pegged at $680.7 million.
Net income is still expected in the band of $66-$74 million. The range suggests a decline of 4.3% to an increase of 7.2% from the year-ago period.
Summing Up
HMS Holdings ended third-quarter 2020 on a weak note. The decline in PHM revenues during the quarter is concerning. Cut-throat competition in the U.S. medical cost-containment space remains a dampener. Nonetheless, despite the recent challenges, the company is well positioned to deliver value to clients, while its business outlook for the fourth quarter of 2020 remains positive.
However, the company witnessed revenue growth within its COB and PI segments during the quarter. A strong 2020 outlook also instills investor optimism in the stock. Moreover, the company witnessed expansion in both gross and operating margins in the quarter under review.
Zacks Rank and Key Picks
HMS Holdings currently carries a Zacks Rank #3 (Hold).
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%.
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%.
AngioDynamics reported first-quarter fiscal 2021 adjusted 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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HMS Holdings (HMSY) Climbs 7.4% Post In-Line Q3 Earnings
HMS Holdings Corp’s share price rallied 7.4% on Nov 6 following the release of third-quarter 2020 results.
The company reported adjusted earnings per share (EPS) of 30 cents for third-quarter 2020, in line with the Zacks Consensus Estimate. However, the bottom line rose 20% from the year-ago quarter.
Revenues of $165.2 million missed the Zacks Consensus Estimate by 3.4%. However, the top line rose 12.5% on a year-over-year basis.
Q3 Segmental Analysis by Product
Payment Integrity (“PI”) revenues amounted to $38 million, up 2.6% year over year.
Population Health Management (“PHM”) revenues totaled $13.4 million in the quarter under review, down 11.9% on a year-over-year basis.
Revenues at the Coordination of Benefits (“COB”) segment amounted to $113.9 million in the third quarter, up 20.3% year over year. Organic COB revenues, excluding Accent, rose 9% to $103.1 million.
Margin Analysis
Gross profit came in at $53.4 million, up 17.9% from the prior-year quarter. Gross margin was 32.3% of net revenues, up 149 basis points (bps) year over year.
Operating costs came in at $26.2 million, down 7.1%.
Operating profit in the third quarter was $27.2 million, up 59.4% from the year-ago quarter. Operating margin was 16.5%, up 484 bps from the prior-year quarter.
HMS Holdings Corp Price, Consensus and EPS Surprise
HMS Holdings Corp price-consensus-eps-surprise-chart | HMS Holdings Corp Quote
Financial Update
The company exited the third quarter with cash and cash equivalents of $211 million, up from $193.1 million at the end of the second quarter.
Cumulative net cash provided by operating activities at the end of the third quarter totaled $92.9 million, compared with $112.9 million a year ago.
2020 Guidance
The company has reaffirmed its 2020 guidance.
For 2020, the company reaffirmed revenue guidance at $680-$690 million, indicating growth of 10.5-12.1% from the year-ago figure. The Zacks Consensus Estimate for the same is pegged at $680.7 million.
Net income is still expected in the band of $66-$74 million. The range suggests a decline of 4.3% to an increase of 7.2% from the year-ago period.
Summing Up
HMS Holdings ended third-quarter 2020 on a weak note. The decline in PHM revenues during the quarter is concerning. Cut-throat competition in the U.S. medical cost-containment space remains a dampener. Nonetheless, despite the recent challenges, the company is well positioned to deliver value to clients, while its business outlook for the fourth quarter of 2020 remains positive.
However, the company witnessed revenue growth within its COB and PI segments during the quarter. A strong 2020 outlook also instills investor optimism in the stock. Moreover, the company witnessed expansion in both gross and operating margins in the quarter under review.
Zacks Rank and Key Picks
HMS Holdings currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader medical space that have announced 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 of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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%.
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%.
AngioDynamics reported first-quarter fiscal 2021 adjusted 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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Experts extracted 7 stocks from the list of 220 Zacks Rank #1 Strong Buys that has beaten the market more than 2X over with a stunning average gain of +24.3% per year.
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