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HealthEquity (HQY) Up 10.3% Since Last Earnings Report: Can It Continue?
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A month has gone by since the last earnings report for HealthEquity (HQY - Free Report) . Shares have added about 10.3% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is HealthEquity due for a pullback? 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.
HealthEquity reported adjusted earnings per share of 35 cents in third-quarter fiscal 2022, which beat the Zacks Consensus Estimate by 2.9%. However, the bottom line fell 14.6% on a year-over-year basis.
GAAP loss per share in the fiscal third quarter was 6 cents against the year-ago quarter’s earnings per share of 2 cents.
Revenues in Detail
In the fiscal third quarter, the company generated revenues of $179.9 million, lagging the Zacks Consensus Estimate by 2.7%. However, the top line inched up 0.3% from the prior-year quarter.
HSA Details
As of Oct 31, 2021, the total number of HSA for which HealthEquity served as a non-bank custodian (HSA members) came in at 6.2 million, up 14.3% year over year.
Total Active HSA assets were $16.4 billion at the end of the reported quarter, up 32.1% year over year. Total Accounts, as of Oct 31, 2021, were 13.3 million, up 6.4% year over year. This uptick included total HSAs and 7.1 million CDB.
Revenue Sources
HealthEquity derives revenues from three sources: Service revenues, Custodial revenues and Interchange revenues.
Service revenues totaled $102.7 million in the quarter, down 1.7% year over year, primarily due to a fall in CDB service revenues in flexible spending accounts or FSAs, commuter and COBRA services. However, this was partially offset by 10% growth in average HSA accounts.
Custodial revenues totaled $49 million, up 0.9% from the year-ago period.
Interchange revenues totaled $28.2 million, up 7.5% year over year.
Margin Details
In the quarter under review, HealthEquity’s gross profit fell 1.2% to $103.3 million. Gross margin contracted 88 bps to 57.4%.
Sales and marketing expenses fell 1.2% to $12.7 million year over year. Technology and development expenses climbed 23.8% to $38.1 million, whereas general and administrative expenses declined 9.5% year over year to $20 million. Adjusted operating expenses of $70.8 million increased 7.7%.
Adjusted operating profit totaled $32.5 million, declining 16.2% from the prior-year quarter. Adjusted operating margin in the quarter contracted 357 bps to 18.1%.
Financial Position
The company exited third-quarter fiscal 2022 with cash and cash equivalents of $649.1 million compared with $753.8 million at the end of the fiscal second quarter. Total debt in the fiscal third quarter was $930.1 million compared with $973.6 million at the end of the fiscal second quarter.
Cumulative net cash flow from operating activities in the quarter totaled $90.4 million compared with $120.7 million in the year-ago period.
FY22 Guidance
HealthEquity has lowered its financial outlook for the full fiscal year.
For fiscal 2022, revenues are projected in the range of $750 million-$755 million, lowered from the earlier-provided outlook of $755-$765 million. The Zacks Consensus Estimate for the same is currently pegged at $763.1 million.
Adjusted earnings per share is expected within $1.30-$1.35, lowered from the earlier-provided projection of $1.45-$1.50. The Zacks Consensus Estimate for the same currently stands at $1.48.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review. The consensus estimate has shifted -67.26% due to these changes.
VGM Scores
At this time, HealthEquity has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. 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 indicates a downward shift. It's no surprise HealthEquity has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.
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HealthEquity (HQY) Up 10.3% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for HealthEquity (HQY - Free Report) . Shares have added about 10.3% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is HealthEquity due for a pullback? 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.
HealthEquity Q3 Earnings Beat, FY 2022 View Lowered
HealthEquity reported adjusted earnings per share of 35 cents in third-quarter fiscal 2022, which beat the Zacks Consensus Estimate by 2.9%. However, the bottom line fell 14.6% on a year-over-year basis.
GAAP loss per share in the fiscal third quarter was 6 cents against the year-ago quarter’s earnings per share of 2 cents.
Revenues in Detail
In the fiscal third quarter, the company generated revenues of $179.9 million, lagging the Zacks Consensus Estimate by 2.7%. However, the top line inched up 0.3% from the prior-year quarter.
HSA Details
As of Oct 31, 2021, the total number of HSA for which HealthEquity served as a non-bank custodian (HSA members) came in at 6.2 million, up 14.3% year over year.
Total Active HSA assets were $16.4 billion at the end of the reported quarter, up 32.1% year over year. Total Accounts, as of Oct 31, 2021, were 13.3 million, up 6.4% year over year. This uptick included total HSAs and 7.1 million CDB.
Revenue Sources
HealthEquity derives revenues from three sources: Service revenues, Custodial revenues and Interchange revenues.
Service revenues totaled $102.7 million in the quarter, down 1.7% year over year, primarily due to a fall in CDB service revenues in flexible spending accounts or FSAs, commuter and COBRA services. However, this was partially offset by 10% growth in average HSA accounts.
Custodial revenues totaled $49 million, up 0.9% from the year-ago period.
Interchange revenues totaled $28.2 million, up 7.5% year over year.
Margin Details
In the quarter under review, HealthEquity’s gross profit fell 1.2% to $103.3 million. Gross margin contracted 88 bps to 57.4%.
Sales and marketing expenses fell 1.2% to $12.7 million year over year. Technology and development expenses climbed 23.8% to $38.1 million, whereas general and administrative expenses declined 9.5% year over year to $20 million. Adjusted operating expenses of $70.8 million increased 7.7%.
Adjusted operating profit totaled $32.5 million, declining 16.2% from the prior-year quarter. Adjusted operating margin in the quarter contracted 357 bps to 18.1%.
Financial Position
The company exited third-quarter fiscal 2022 with cash and cash equivalents of $649.1 million compared with $753.8 million at the end of the fiscal second quarter. Total debt in the fiscal third quarter was $930.1 million compared with $973.6 million at the end of the fiscal second quarter.
Cumulative net cash flow from operating activities in the quarter totaled $90.4 million compared with $120.7 million in the year-ago period.
FY22 Guidance
HealthEquity has lowered its financial outlook for the full fiscal year.
For fiscal 2022, revenues are projected in the range of $750 million-$755 million, lowered from the earlier-provided outlook of $755-$765 million. The Zacks Consensus Estimate for the same is currently pegged at $763.1 million.
Adjusted earnings per share is expected within $1.30-$1.35, lowered from the earlier-provided projection of $1.45-$1.50. The Zacks Consensus Estimate for the same currently stands at $1.48.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review. The consensus estimate has shifted -67.26% due to these changes.
VGM Scores
At this time, HealthEquity has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. 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 indicates a downward shift. It's no surprise HealthEquity has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.