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HealthEquity (HQY) Down 5.1% Since Last Earnings Report: Can It Rebound?
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It has been about a month since the last earnings report for HealthEquity (HQY - Free Report) . Shares have lost about 5.1% 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? Well, first let's take a quick look at its most recent earnings report in order to get a better handle on the recent catalysts for HealthEquity, Inc. before we dive into how investors and analysts have reacted as of late.
HQY Q2 Earnings Beat Estimates, Revenues Up Y/Y
HealthEquity reported adjusted earnings per share of $1.08 for second-quarter fiscal 2026, surpassing the Zacks Consensus Estimate by 17.4%. The bottom line improved 25.6% on a year-over-year basis.
GAAP earnings per share in the fiscal second quarter was 68 cents, up 70% compared with the year-ago quarter’s earnings per share.
HealthEquity Revenues in Detail
In the fiscal second quarter, the company generated revenues of $325.8 million, which beat the Zacks Consensus Estimate by 2.2%. The top line improved 8.6% from the prior-year quarter.
Revenue Sources of HealthEquity
HealthEquity derives revenues from three sources: Service revenues, Custodial revenues, and Interchange revenues.
Service revenues totaled $117.9 million in the quarter, up 0.9% year over year. This reflected a higher number of HSAs and invested HSA Assets. This figure compares favorably with our second-quarter projection of $121.9 million.
Custodial revenues totaled $159.9 million, up 15.3% from the year-ago period. Our projection for the fiscal second-quarter Custodial revenues was $140.4 million.
Interchange revenues totaled $48.1 million, up 8% year over year. This figure compares favorably with our fiscal second-quarter projection of $52 million.
HQY Margin Details
In the quarter under review, HealthEquity’s gross profit rose 13.9% year over year to $232.6 million. The gross margin expanded 340 basis points (bps) to 71.4%. We had projected the gross margin to be 63.2% in the fiscal second quarter.
Sales and marketing expenses declined 7.5% to $19.9 million year over year, whereas technology and development expenses climbed 10.6% year over year to $64.8 million. General and administrative expenses decreased 7% year over year to $29.9 million. Total operating expenses of $142.9 million decreased 1.5% year over year.
Operating profit totaled $89.6 million, improving significantly by 52.1% from the prior-year quarter. The operating margin in the quarter expanded by a huge 790 bps to 27.5% compared with the prior-year quarter.
Financial Position of HQY
The company exited the second quarter of fiscal 2026 with cash and cash equivalents of $304.5 million compared with $287.9 million at the first quarter of fiscal 2026-end. Total debt (net of issuance costs) at the end of second-quarter fiscal 2026 was $1.01 billion compared with $1.06 billion at the end of first-quarter fiscal 2026.
Cumulative net cash provided by operating activities at the end of second-quarter fiscal 2026 totaled $200.6 million compared with $173.6 million a year ago.
HQY's FY26 Guidance
For fiscal 2026, revenues are now projected to be between $1.290 billion and $1.310 billion compared with the previous guidance of $1.285 billion and $1.305 billion. The Zacks Consensus Estimate is currently pegged at $1.30 billion.
Adjusted earnings per share is now expected to be in the range of $3.74-$3.91 compared with the previous guidance of $3.61-$3.78. The Zacks Consensus Estimate currently stands at $3.73.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
VGM Scores
At this time, HealthEquity has a strong Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Charting a somewhat similar path, the stock has a grade of C on the value side, putting it in the middle 20% 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 indicates a downward shift. Notably, HealthEquity has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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HealthEquity (HQY) Down 5.1% 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 5.1% 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? Well, first let's take a quick look at its most recent earnings report in order to get a better handle on the recent catalysts for HealthEquity, Inc. before we dive into how investors and analysts have reacted as of late.
HQY Q2 Earnings Beat Estimates, Revenues Up Y/Y
HealthEquity reported adjusted earnings per share of $1.08 for second-quarter fiscal 2026, surpassing the Zacks Consensus Estimate by 17.4%. The bottom line improved 25.6% on a year-over-year basis.
GAAP earnings per share in the fiscal second quarter was 68 cents, up 70% compared with the year-ago quarter’s earnings per share.
HealthEquity Revenues in Detail
In the fiscal second quarter, the company generated revenues of $325.8 million, which beat the Zacks Consensus Estimate by 2.2%. The top line improved 8.6% from the prior-year quarter.
Revenue Sources of HealthEquity
HealthEquity derives revenues from three sources: Service revenues, Custodial revenues, and Interchange revenues.
Service revenues totaled $117.9 million in the quarter, up 0.9% year over year. This reflected a higher number of HSAs and invested HSA Assets. This figure compares favorably with our second-quarter projection of $121.9 million.
Custodial revenues totaled $159.9 million, up 15.3% from the year-ago period. Our projection for the fiscal second-quarter Custodial revenues was $140.4 million.
Interchange revenues totaled $48.1 million, up 8% year over year. This figure compares favorably with our fiscal second-quarter projection of $52 million.
HQY Margin Details
In the quarter under review, HealthEquity’s gross profit rose 13.9% year over year to $232.6 million. The gross margin expanded 340 basis points (bps) to 71.4%. We had projected the gross margin to be 63.2% in the fiscal second quarter.
Sales and marketing expenses declined 7.5% to $19.9 million year over year, whereas technology and development expenses climbed 10.6% year over year to $64.8 million. General and administrative expenses decreased 7% year over year to $29.9 million. Total operating expenses of $142.9 million decreased 1.5% year over year.
Operating profit totaled $89.6 million, improving significantly by 52.1% from the prior-year quarter. The operating margin in the quarter expanded by a huge 790 bps to 27.5% compared with the prior-year quarter.
Financial Position of HQY
The company exited the second quarter of fiscal 2026 with cash and cash equivalents of $304.5 million compared with $287.9 million at the first quarter of fiscal 2026-end. Total debt (net of issuance costs) at the end of second-quarter fiscal 2026 was $1.01 billion compared with $1.06 billion at the end of first-quarter fiscal 2026.
Cumulative net cash provided by operating activities at the end of second-quarter fiscal 2026 totaled $200.6 million compared with $173.6 million a year ago.
HQY's FY26 Guidance
For fiscal 2026, revenues are now projected to be between $1.290 billion and $1.310 billion compared with the previous guidance of $1.285 billion and $1.305 billion. The Zacks Consensus Estimate is currently pegged at $1.30 billion.
Adjusted earnings per share is now expected to be in the range of $3.74-$3.91 compared with the previous guidance of $3.61-$3.78. The Zacks Consensus Estimate currently stands at $3.73.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
VGM Scores
At this time, HealthEquity has a strong Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Charting a somewhat similar path, the stock has a grade of C on the value side, putting it in the middle 20% 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 indicates a downward shift. Notably, HealthEquity has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.