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MARKETS LIVE BLOG:

STOCKS CLIMB AS DOW POSTS 8TH STRAIGHT WIN

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Here's Why You Should Add HMS Holdings to Your Portfolio Now

Zacks Equity Research
·4 min read

HMS Holdings, Corp. HMSY is gaining on strong momentum within the Payment Integrity (PI) and Population Health Management (PHM) segments. A solid guidance has also raised optimism.

The company, with a market capitalization of $2.73 billion, is the leading provider of Coordination of Benefits (“COB”) services to government and commercial healthcare payers.The company’s earnings are expected to improve 10% over the next five years. This Zacks Rank #2 (Buy) company has a trailing four-quarter positive earnings surprise of 14.3%, on average.

In the past three months, the stock has gained 55.7% compared with 27.6% rise of its industry.

Let’s delve deeper into the factors working in favor of the company.

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PI Solutions Hold Promise: PI comes under HMS Holdings’ unique suite of Analytical Services.Management expects PI to be a significant contributor to the Analytical Services wing in 2020. The company continues to witness expansion of PI client base in both the commercial health plan and government markets.

Of late, the company has signed its second Medicaid managed care plan to leverage its population risk intelligence solution. The plan aims to target conditions like opioid abuse, at-risk pregnancies and chosen non-ADHD medications for those who were not receiving behavioral therapy.

Per management, HMS Holdings commenced a research project with an Australia-based digital health research organization to leverage leading U.S. and Australian Universities to research healthcare issues of critical importance. Notably, the company’s work with Stanford University is focused on detecting potential risk factors for opioid abuse and misuse, which is an international healthcare crisis.



The PI segment maintained strong momentum, with first-quarter revenues improving 41.8% year over year.

PHM Gaining Ground: The PHM segment comes under HMS Holdings’ unique suite of Analytical Services.

The company expects the momentum in the PHM business line to continue in the near term as well. It anticipates solid revenue growth on an annual basis driven by introduction of improved solutions and expansion of its share of important clients. The company continues to gain traction in the market with its sales pipeline being solid.

In the first quarter of 2020, the PHM segment saw an uptick in sales of Essette and Elli despite a revenue decline of 2.3% year over year.

Solid 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. Net income is expected in the band of $62-$74 million, indicating growth of 12.1-14.5% from the year-ago figure. Adjusted EBITDA is expected in the range of $177-$187 million, suggesting a rise of 7.9-14% from the year-ago figure.

Estimates Trend

The Zacks Consensus Estimate for 2020 revenues is pegged at $694.3 million, suggesting a 10.8% rise from the year-ago reported number.The same for earnings is pegged at $1.21, suggesting a fall of 8.3% from the year-ago reported number.

Other Key Picks

A few other top-ranked stocks from the broader medical space are Aphria APHA, Surmodics SRDX and Biogen BIIB.

Aphria’s long-term earnings growth rate is estimated at 24.6%. The company presently carries a Zacks Rank #2.You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Surmodics’ long-term earnings growth rate is estimated at 10%. The company presently carries a Zacks Rank #1.

Biogen’s long-term earnings growth rate is estimated at 14%. It currently carries a Zacks Rank #2.

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