A month has gone by since the last earnings report for HMS Holdings (HMSY). 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.
COB
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.