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Change Healthcare (CHNG) Down 3.4% Since Last Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for Change Healthcare (CHNG - Free Report) . Shares have lost about 3.4% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is 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 the most recent earnings report in order to get a better handle on the important drivers.

Change Healthcare Q2 Earnings Beat, Revenues Miss

Change Healthcare Inc. reported second-quarter fiscal 2022 adjusted earnings per share of 35 cents, which beat the Zacks Consensus Estimate of 34 cents by 2.9%. The bottom line improved 9.4% on a year-over-year basis.

Net loss per share was 11 cents in the quarter, slightly narrower than the year-ago quarter’s loss of 13 cents.

Revenue Details

Revenues rose 9.4% from the prior-year period to $826.8 million in the reported quarter. The top line, however, missed the Zacks Consensus Estimate by 0.8%.

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 $363.4 million, up 2.4% on a year-over-year basis.

Network Solutions

Revenues at this segment were $215.6 million, up 17.1% year over year.

Technology-Enabled Services

Revenues at this segment were $231.9 million, which remained flat on a year-over-year basis.

Postage and Eliminations

Revenues at this segment totaled $19.1 million, down 20.7% year over year.

Margin Analysis

Total operating expenses were $815.6 million, up 8.4% from the prior-year quarter.

In the quarter under review, Change Healthcare reported an operating income of $11.1 million, compared with $3.3 million in the year-ago quarter.

Financial Position

The company exited the quarter with cash and cash equivalents of $80.4 million, compared with $109.1 million in the preceding quarter.

Cash provided operating activities at the end of the fiscal second quarter amounted to $261.4 million compared with $296.6 million in the year-ago period.

Guidance

Given the proposed merger agreement (with OptumInsight), Change Healthcare will not be issuing financial guidance going forward.

How Have Estimates Been Moving Since Then?

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

VGM Scores

Currently, Change Healthcare has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. However, the stock was allocated a grade of A on the value side, putting it in the top 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 has been net zero. 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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