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Change Healthcare (CHNG) Down 0.8% Since Last Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for Change Healthcare (CHNG - Free Report) . Shares have lost about 0.8% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Change Healthcare 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.

Change Healthcare Q4 Earnings & Revenues Top Estimates

Change Healthcare Inc. reported fourth-quarter fiscal 2021 adjusted earnings per share of 42 cents, which beat the Zacks Consensus Estimate of 37 cents by 13.5%. However, the bottom line remained flat on a year-over-year basis.

Revenue Details

Revenues rose 1.4% from the prior-year period to $855.2 million in the reported quarter. Further, the top line outpaced the Zacks Consensus Estimate by 1.7%.

Segmental Analysis

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

Software and Analytics

Revenues at this segment totaled $416.3 million, down 0.6% on a year-over-year basis.

Network Solutions

Revenues at this segment were $198.3 million, up 30.3% year over year.

Technology-Enabled Services

Revenues at this segment amounted to $227.3 million, down 6.2% year over year.

Postage and Eliminations

Revenues at this segment totaled $23.4 million, down 22.3% year over year.

Margin Analysis

Total operating expenses were $813.5 million, down 8.8% from the prior-year quarter.

In the quarter under review, Change Healthcare reported operating income of $41.7 million, against the year-ago quarter’s operating loss of $48.5 million.

Financial Position

The company exited the quarter with cash and cash equivalents of $113.1 million, compared with $137.4 million in the preceding quarter.

Cumulative cash provided operating activities at the end of fourth-quarter fiscal 2021 amounted to $586.2 million compared with cash flow from operating activities of $593.3 million in the year-ago period.

Merger Update

On Jan 5, 2021, Change Healthcare and OptumInsight — a diversified health services company — which is also part of UnitedHealth Group, made an agreement to combine. Per the agreement, OptumInsight (through a wholly-owned subsidiary) will purchase all of the outstanding shares of Change Healthcare common stock for $25.75 per share in cash. The merger is anticipated to be completed in the second half of 2021.

Guidance

Given the recently proposed merger agreement, Change Healthcare will not be issuing financial guidance going forward.

How Have Estimates Been Moving Since Then?

Estimates review followed an upward path over the past two months. The consensus estimate has shifted 20.37% due to these changes.

VGM Scores

Currently, Change Healthcare has a subpar Growth Score of D, however its Momentum Score is doing a lot better with an A. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% 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

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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