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HMS Holdings (HMSY) Down 7.6% Since Last Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for HMS Holdings (HMSY - Free Report) . Shares have lost about 7.6% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is HMS Holdings due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

HMS Holdings Q3 Earnings Top Estimates, Revenues Miss

HMS Holdings Corp. reported adjusted earnings of 30 cents per share in third-quarter 2019, which surpassed the Zacks Consensus Estimate of 27 cents by 11.1%. However, the bottom line declined 3.2% from the year-ago quarter.

Revenues of $146.8 million missed the Zacks Consensus Estimate by 11.3%. Moreover, the top line declined 4.8% on a year-over-year basis.

Q3 Segmental Analysis by Product

Analytical Services

Revenues at this segment were $52.2 million in the third quarter, up 7.6% year over year.

Within Analytical Services, PI revenues (excluding Medicare RAC) amounted to $37 million, up 11.4% year over year.

PHM revenues totaled $15.2 million in the quarter under review, down 0.7% on a year-over-year basis.

Revenues at the COB segment amounted to $94.6 million in the third quarter, down 10.5% year over year.

Margin Analysis

Total cost of services in the reported quarter was $101.5 million, down 0.3% year over year.

Gross profit came in at $45.3 million, which declined 13.6% from the prior-year quarter figure. Gross margin was 30.9% of net revenues, down 300 bps year over year.

Selling, general and administrative expenses totaled $28.2 million, up 0.2% year over year. Operating income in the third quarter was $17.1 million, down 29.6% from the year-ago quarter. Operating margin was 11.6%, down 410 bps from the prior-year quarter.

Financial Update

Cash and cash equivalents amounted to $280.6 million, up 4.4% sequentially.

Net cash provided by operating activities for the nine months ended Sep 30, 2019, came in at $112.9 million, compared with $55.5 million reported in the year-ago quarter.

Guidance Revised

For 2019, the company now anticipates revenues between $630 million and $640 million (down from the previously guided range of $650-$660 million). This indicates an improvement of 5.4-7% from the prior-year quarter. The mid-point of $635 million is higher than the Zacks Consensus Estimate of $634.1 million.

Net income is expected in the band of $89-$94 million (up from the prior band of $85-$90 million), suggesting growth of 61.8-70.9% from the year-ago reported figure.

Adjusted EBITDA is expected in the range of $182-$187 million (down from the previously guided range of $185-$190 million), suggesting improvement of 12.3-15.4% from the year-ago comparable period.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month. The consensus estimate has shifted 6.25% due to these changes.

VGM Scores

At this time, HMS Holdings has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Following the exact same course, 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 C. If you aren't focused on one strategy, this score is the one you should be interested in.


Estimates have been broadly trending upward for the stock, and the magnitude of these revisions has been net zero. 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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