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Why Is HMS Holdings (HMSY) Up 4.7% Since Last Earnings Report?

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It has been about a month since the last earnings report for HMS Holdings (HMSY - Free Report) . Shares have added about 4.7% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is HMS Holdings 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.

HMS Holdings' Q1 Earnings Beat, Margins Expand

HMS Holdings reported adjusted earnings of 28 cents per share in first-quarter 2019, which surpassed the Zacks Consensus Estimate of 22 cents by 27.3%. The bottom line also soared 64.7% from the year-ago quarter.

Revenues totaled $147.9 million, which beat the Zacks Consensus Estimate by nearly 3%. Moreover, the top line improved 4.6% on a year-over-year basis.

Q1 Segmental Analysis by Product

Analytical Services

Revenues at this segment were $42.1 million in the first quarter, down 15.3% year over year.

Within Analytical Services, PI revenues (excluding Medicare RAC) amounted to $27.7 million, down 8.6% year over year.

TPM revenues totaled $14.4 million in the quarter under review, reflecting an improvement of 30.9% on a year-over-year basis.

COB

Revenues at the COB segment grossed $105.9 million in the first quarter, up 15.5% year over year.

Q1 Segmental Analysis by Market

Commercial revenues in the first quarter were $76.3 million, reflecting growth of 6.3% on a year-over-year basis.

State government revenues amounted to $61.7 million, which climbed 13% year over year.

Federal and Other revenues totaled $10 million in the quarter, down 33.3% year over year.

Margin Analysis

Total cost of services in the reported quarter was $99 million, up 1.5% year over year.

Adjusted gross profit came in at $48.9 million, up 11.5% from the prior-year quarter figure. Adjusted gross margin was 33.1% of net revenues, up 200 bps year over year.

Selling, general and administrative expenses totaled $29.2 million, down 8.6% year over year. Operating income in the first quarter was $19.7 million, up 65.3% on a year-over-year basis. Operating margin in the quarter was 13.3% of net revenues, up 490 bps.

Financial Update

Cash and cash equivalents amounted to $214.5 million, up 19.8% from the year-end 2018.

Net cash provided by operating activities for the three months ended Mar 31, 2019, came in at $23.1 million, surging 57.1% from the year-ago quarter.

Guidance

The company has not provided any update regarding its previously-provided guidance for the full-year 2019. Notably, the company had issued a guidance for the full year 2019 during the fourth quarter earnings call.

How Have Estimates Been Moving Since Then?

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

VGM Scores

Currently, HMS Holdings 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 was allocated 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 B. 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, HMS Holdings has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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