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HMS Holdings (HMSY) Earnings and Revenues Beat Estimates in Q1

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HMS Holdings Corp (HMSY - Free Report) reported adjusted earnings per share (EPS) of 32 cents in first-quarter 2020, which beat the Zacks Consensus Estimate of 25 cents by 28%. Further, the bottom line rose 14.3% from the year-ago quarter.

Revenues of $171.4 million beat the Zacks Consensus Estimate by 5.4%. Also, the top line improved 15.9% on a year-over-year basis.

Q1 Segmental Analysis by Product

Payment Integrity (“PI”) revenues amounted to $39.3 million, up 41.8% year over year.

Population Health Management (“PHM”) revenues totaled $14 million in the quarter under review, down 2.3% on a year-over-year basis.
 
Revenues at the Coordination of Benefits (“COB”) segment amounted to $118.1 million in the first quarter, up 11.5% year over year.

HMS Holdings Corp Price, Consensus and EPS Surprise

 

HMS Holdings Corp Price, Consensus and EPS Surprise

HMS Holdings Corp price-consensus-eps-surprise-chart | HMS Holdings Corp Quote

 
Margin Analysis

Gross profit came in at $54.3 million, up 10.9% from the prior-year quarter. Gross margin was 31.7% of net revenues, down 141basis points (bps) year over year.

Operating profit in the first quarter was $18.5 million, down 6.4% from the year-ago quarter. Operating margin was 10.8%, down 255 bps from the prior-year quarter.

Financial Update

The company exited the first quarter with cash and cash equivalents of $148 million, up from $139.3 million at the end of 2019.

Net cash provided by operating activities at the end of the first quarter came in at $17.1 million, compared with $28.5 million in the year-ago quarter.

2020 Guidance

The company has revised its 2020 guidance.

For 2020, the company anticipates revenues between $690 million and $705 million, indicating growth of 12.1-14.5% from the year-ago figure. The Zacks Consensus Estimate for the same is pegged at $696.5 million.

Net income is expected in the band of $62-$74 million. Adjusted EBITDA is expected in the range of $177-$187 million, suggesting a rise of 7.9-14% from the year-ago figure.

Summing Up

HMS Holdings ended first-quarter 2020 on a strong note. The company witnessed revenue growth within COB and PI segments during the quarter. A strong 2020 outlook also instills investor optimism in the stock.

However, the decline in PHM revenues is concerning. Cut-throat competition in the U.S. medical cost containment space remains a dampener. Moreover, the company witnessed contraction in both gross and operating margins in the quarter under review.

Zacks Rank and Key Picks

HMS Holdings currently carries a Zacks Rank #3 (Hold).

A few better-ranked stocks in the broader medical space are Aphria Inc. (APHA - Free Report) , Biogen Inc. (BIIB - Free Report) and Eli Lilly and Company (LLY - Free Report) .

Aphria reported third-quarter fiscal 2020 adjusted EPS of 2 cents against the Zacks Consensus Estimate of a loss of 4 cents. Net revenues of $64.4 million outpaced the consensus estimate by 14.6%. The company carries a Zacks Rank #2 (Buy) at present.You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Biogen currently carries a Zacks Rank #2. It reported first-quarter 2020 adjusted EPS of $9.14, surpassing the Zacks Consensus Estimate by 18.1%. Revenues of $3.53 billion outpaced the consensus mark by 3.2%.

Eli Lilly delivered first-quarter 2020 EPS of $1.75, outpacing the Zacks Consensus Estimate by 12.9%. Revenues of $145.3 million surpassed the consensus estimate by 6.3%. The company currently sports a Zacks Rank #1.

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