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HealthEquity (HQY) Closes Conduent's BenefitWallet Acquisition

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HealthEquity (HQY - Free Report) recently announced the completion of the acquisition of Conduent’s BenefitWallet Health Savings Account (HSA) portfolio.

In September 2023, HealthEquity entered into an agreement to acquire the BenefitWallet HSA portfolio from Conduent Business Services, LLC

Price Performance

In the past six months, HQY shares have gained 12.7% compared with the industry’s rise of 13.0%. The S&P 500 has gained 17.7% in the same time frame.

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More on the Agreement

The acquisition agreement contemplated a purchase price of approximately $425 million for the transition of all BenefitWallet HSA accounts, including approximately 665,000 customer accounts and their approximately $2.7 billion of HSA assets to HealthEquity.

Acquisition Benefits to HealthEquity

HealthEquity is the largest HSA administrator in the United States, with more than 8.7 million HSA accounts as of Jan 31, 2024. The total assets of its HSA accounts are worth approximately $25.2 billion for the same period. As of June 2023, the company had a market share of 20% in the HSA category.

HQY derives revenues primarily from the services that it provides to make beneficial healthcare savings and spending decisions. Customers who invest in mutual funds through the company are also charged fees for assistance in increasing their HSA assets. HSA assets held by its depository partners generate custodial revenues for it as well.

The acquisition of BenefitWallet implies a significant boost to the service revenues of HealthEquity with an increase in the number of customer accounts. Moreover, Conduent’s HSA assets should lead to higher fees and custodial revenues.

The addition of Conduent’s portfolio enhances HQY’s focus on building its HSA business. The company has increased its market share from 4% to 20% in the last 12 years, which should further increase now, after the completion of the deal with Conduent.

Notable Developments

HealthEquity is expected to release its first-quarter fiscal 2025 results on Jun 3, 2024.

In March 2024, HealthEquity reported better-than-expected fourth-quarter fiscal 2024 results. The company witnessed solid top-line and bottom-line performances in the fiscal fourth quarter. The top line benefited from robust contributions from all its revenue sources. Solid growth in HSAs also bolstered the top line.

In the fiscal fourth quarter, HealthEquity reiterated its revenue outlook and initiated its earnings per share (EPS) projections for fiscal 2025.

For fiscal 2025, revenues are continued to be projected between $1.14 billion and $1.16 billion. Adjusted EPS is expected to be in the range of $2.79-$2.96.

Zacks Rank & Stocks to Consider

HQY carries a Zacks Rank #3 (Hold) at present.

Some better-ranked stocks in the broader medical space that have announced quarterly results are Align Technology, Inc. (ALGN - Free Report) , Ecolab (ECL - Free Report) and Boston Scientific Corporation (BSX - Free Report) .

Align Technology, carrying a Zacks Rank of 2 (Buy), reported first-quarter 2024 adjusted EPS of $2.14, beating the Zacks Consensus Estimate by 8.1%. Revenues of $997.4 million outpaced the consensus mark by 2.6%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Align Technology has a long-term estimated growth rate of 6.9%. ALGN’s earnings surpassed estimates in three of the trailing four quarters and missed once, the average surprise being 5.9%.

Ecolab, carrying a Zacks Rank of 2 at present, has an estimated long-term growth rate of 13.3%. ECL’s earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 1.7%.

Ecolab’s shares have rallied 33.8% against the industry’s 9.3% decline in the past year.

Boston Scientific reported first-quarter 2024 adjusted EPS of 56 cents, beating the Zacks Consensus Estimate by 9.8%. Revenues of $3.86 billion surpassed the Zacks Consensus Estimate by 4.9%. It currently carries a Zacks Rank #2.

Boston Scientific has a long-term estimated growth rate of 12.5%. BSX’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 7.5%.

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