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HMS Holdings (HMSY) Q3 Earnings Top Estimates, Revenues Miss

Zacks Equity Research

HMS Holdings Corp. HMSY 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.

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

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.

Summing Up

HMS Holdings ended third-quarter 2019 on a mixed note, wherein the bottom line beat the Zacks Consensus Estimate, while the top line missed the same. The stock continues to benefit from Analytical Services unit. Strong 2019 outlook also instills investor optimism in the stock.

However, cut throat competition in the U.S. medical cost containment space remains a concern. Moreover, the company witnessed contraction in both gross and operating margins in the quarter under review.

Zacks Rank

Currently, HMS Holdings carries a Zacks Rank #4 (Sell).

Earnings of Other MedTech Majors at a Glance

Some other top-ranked stocks that reported solid results this earning season are Edwards Lifesciences EW, Thermo Fisher Scientific Inc. TMO and ResMed Inc. RMD, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Edwards Lifesciences delivered third-quarter 2019 adjusted EPS of $1.41, outpacing the Zacks Consensus Estimate by 15.6%. Third-quarter net sales of $1.09 billion surpassed the Zacks Consensus Estimate by 5.5%.

Thermo Fisher delivered third-quarter 2019 adjusted EPS of $2.94, which surpassed the Zacks Consensus Estimate by 2.1%. Revenues of $6.27 billion outpaced the Zacks Consensus Estimate by 1.3%.

ResMed reported third-quarter 2019 adjusted EPS of 93 cents, which beat the Zacks Consensus Estimate of 87 cents by 6.9%. Revenues were $681.1 million, surpassing the Zacks Consensus Estimate by 3.6%.

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