We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
HealthEquity (HQY) Down 5% Since Last Earnings Report: Can It Rebound?
Read MoreHide Full Article
It has been about a month since the last earnings report for HealthEquity (HQY - Free Report) . Shares have lost about 5% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is HealthEquity 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.
HealthEquity Surpasses Q1 Earnings Estimates, FY24 View Up
HealthEquity reported adjusted earnings per share of 50 cents in first-quarter fiscal 2024, which surpassed the Zacks Consensus Estimate by 21.9%. The bottom line improved 85.2% on a year-over-year basis.
GAAP earnings per share in the fiscal first quarter was 5 cents against the year-ago quarter’s loss of 16 cents.
Revenues in Detail
In the fiscal first quarter, the company generated revenues of $244.4 million, beating the Zacks Consensus Estimate by 1.9%. The top line improved 18.8% from the prior-year quarter.
HSA Details
As of Apr 30, 2023, the total number of HSA for which HealthEquity served as a non-bank custodian (HSA members) came in at 8 million, up 9.3% year over year.
HealthEquity reported 556,000 HSAs with investments as of Apr 30, 2023, up 9.9% year over year. Total Accounts, as of Apr 30, 2023, were 14.9 million, 3.8% year over year. This uptick included total HSAs and 6.9 million other CDBs.
Total HSA assets were $22.32 billion at the end of Apr 30, 2023, up 10.1% year over year. This included $14.11 billion of HSA cash and $8.21 billion of HSA investments.
This figure compares to our fiscal first-quarter HSA cash and HSA investments projection of $15.8 billion and $8.8 billion, respectively. We had projected total HSA assets of $24.6 billion in the fiscal first quarter.
Client-held funds, which are deposits held on behalf of HealthEquity’s clients to facilitate the administration of its CDBs and from which the company generates custodial revenues, were $0.93 billion as of Apr 30, 2023.
Revenue Sources
HealthEquity derives revenues from three sources: Service revenues, Custodial revenues and Interchange revenues.
Service revenues totaled $105.1 million in the quarter, up 0.7% year over year. This figure compares to our Service revenues’ fiscal first-quarter projection of $120.3 million.
Custodial revenues totaled $94.4 million, up 59.1% from the year-ago period. This figure compares to our Custodial revenues’ fiscal first-quarter projection of $70.8 million.
Interchange revenues totaled $44.9 million, up 6.9% year over year. This figure compares to our Interchange revenues’ fiscal first-quarter projection of $46.7 million.
Margin Details
In the quarter under review, HealthEquity’s gross profit rose 32.9% to $147.8 million. The gross margin expanded 643 basis points (bps) to 60.5%.
We had projected 53.9% of gross margin for the fiscal first quarter.
Sales and marketing expenses climbed 20.4% to $19.9 million year over year, whereas technology and development expenses climbed 17.7% to $53.2 million. General and administrative expenses also increased 4.9% year over year to $24.9 million. Adjusted operating expenses of $98 million increased 14.7%.
Adjusted operating profit totaled $49.8 million, improving 93.8% from the prior-year quarter. Adjusted operating margin in the quarter expanded 788 bps to 20.4%.
Financial Position
The company exited first-quarter fiscal 2024 with cash and cash equivalents of $225.6 million compared with $254.3 million at the end of fiscal 2023. Total debt (net of issuance costs) at the end of first-quarter fiscal 2024 was $872.9 million compared with $925.3 million at the end of fiscal 2023.
Net cash flow from operating activities at the end of first-quarter fiscal 2024 totaled $31.5 million compared with $7.1 million in the year-ago period.
FY24 Guidance
HealthEquity has upped its revenue and earnings per share outlook for fiscal 2024.
For fiscal 2024, revenues are now projected to be between $975 million and $985 million, up from the earlier projections of $960 million and $975 million. The Zacks Consensus Estimate for the same is currently pegged at $966.4 million.
Adjusted earnings per share is now expected to be in the range of $1.88-$1.97, up from the prior outlook of $1.74-$1.87. The Zacks Consensus Estimate for the same currently stands at $1.75.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
VGM Scores
At this time, HealthEquity has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. Following the exact same course, 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 D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise HealthEquity has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
HealthEquity (HQY) Down 5% Since Last Earnings Report: Can It Rebound?
It has been about a month since the last earnings report for HealthEquity (HQY - Free Report) . Shares have lost about 5% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is HealthEquity 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.
HealthEquity Surpasses Q1 Earnings Estimates, FY24 View Up
HealthEquity reported adjusted earnings per share of 50 cents in first-quarter fiscal 2024, which surpassed the Zacks Consensus Estimate by 21.9%. The bottom line improved 85.2% on a year-over-year basis.
GAAP earnings per share in the fiscal first quarter was 5 cents against the year-ago quarter’s loss of 16 cents.
Revenues in Detail
In the fiscal first quarter, the company generated revenues of $244.4 million, beating the Zacks Consensus Estimate by 1.9%. The top line improved 18.8% from the prior-year quarter.
HSA Details
As of Apr 30, 2023, the total number of HSA for which HealthEquity served as a non-bank custodian (HSA members) came in at 8 million, up 9.3% year over year.
HealthEquity reported 556,000 HSAs with investments as of Apr 30, 2023, up 9.9% year over year. Total Accounts, as of Apr 30, 2023, were 14.9 million, 3.8% year over year. This uptick included total HSAs and 6.9 million other CDBs.
Total HSA assets were $22.32 billion at the end of Apr 30, 2023, up 10.1% year over year. This included $14.11 billion of HSA cash and $8.21 billion of HSA investments.
This figure compares to our fiscal first-quarter HSA cash and HSA investments projection of $15.8 billion and $8.8 billion, respectively. We had projected total HSA assets of $24.6 billion in the fiscal first quarter.
Client-held funds, which are deposits held on behalf of HealthEquity’s clients to facilitate the administration of its CDBs and from which the company generates custodial revenues, were $0.93 billion as of Apr 30, 2023.
Revenue Sources
HealthEquity derives revenues from three sources: Service revenues, Custodial revenues and Interchange revenues.
Service revenues totaled $105.1 million in the quarter, up 0.7% year over year. This figure compares to our Service revenues’ fiscal first-quarter projection of $120.3 million.
Custodial revenues totaled $94.4 million, up 59.1% from the year-ago period. This figure compares to our Custodial revenues’ fiscal first-quarter projection of $70.8 million.
Interchange revenues totaled $44.9 million, up 6.9% year over year. This figure compares to our Interchange revenues’ fiscal first-quarter projection of $46.7 million.
Margin Details
In the quarter under review, HealthEquity’s gross profit rose 32.9% to $147.8 million. The gross margin expanded 643 basis points (bps) to 60.5%.
We had projected 53.9% of gross margin for the fiscal first quarter.
Sales and marketing expenses climbed 20.4% to $19.9 million year over year, whereas technology and development expenses climbed 17.7% to $53.2 million. General and administrative expenses also increased 4.9% year over year to $24.9 million. Adjusted operating expenses of $98 million increased 14.7%.
Adjusted operating profit totaled $49.8 million, improving 93.8% from the prior-year quarter. Adjusted operating margin in the quarter expanded 788 bps to 20.4%.
Financial Position
The company exited first-quarter fiscal 2024 with cash and cash equivalents of $225.6 million compared with $254.3 million at the end of fiscal 2023. Total debt (net of issuance costs) at the end of first-quarter fiscal 2024 was $872.9 million compared with $925.3 million at the end of fiscal 2023.
Net cash flow from operating activities at the end of first-quarter fiscal 2024 totaled $31.5 million compared with $7.1 million in the year-ago period.
FY24 Guidance
HealthEquity has upped its revenue and earnings per share outlook for fiscal 2024.
For fiscal 2024, revenues are now projected to be between $975 million and $985 million, up from the earlier projections of $960 million and $975 million. The Zacks Consensus Estimate for the same is currently pegged at $966.4 million.
Adjusted earnings per share is now expected to be in the range of $1.88-$1.97, up from the prior outlook of $1.74-$1.87. The Zacks Consensus Estimate for the same currently stands at $1.75.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
VGM Scores
At this time, HealthEquity has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. Following the exact same course, 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 D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise HealthEquity has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.