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

HMS Holdings Corp HMSY 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 and EPS Surprise

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

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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, Biogen Inc. BIIB and Eli Lilly and Company LLY.

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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