HMS Holdings Corp. (NASDAQ:HMSY) reported adjusted earnings per share (EPS) of 27 cents in fourth-quarter 2019, which lagged the Zacks Consensus Estimate of 31 cents by 12.9%. Further, the bottom line declined 12.9% from the year-ago quarter.
Revenues of $163.4 million missed the Zacks Consensus Estimate by 4.4%. However, the top line improved 4.9% on a year-over-year basis.
2019 at a Glance
In 2019, the company reported revenues worth $626.4 million, which improved 4.7% from the previous year.
Adjusted EPS for the year was $1.12, up 7.7% from the previous year.
Q4 Segmental Analysis by Product
Analytical Services
Revenues at this segment were $65 million in the fourth quarter, up 14.2% year over year.
Within Analytical Services, PI revenues (excluding Medicare RAC) amounted to $48.4 million, up 18.3% year over year.
PHM revenues totaled $16.6 million in the quarter under review, up 3.8% on a year-over-year basis.
COB
Revenues at the Coordination of Benefits (COB) segment amounted to $98.6 million in the fourth quarter, down 0.3% year over year.
Margin Analysis
Total cost of services in the reported quarter was $108.6 million, up 7.3% year over year.
Gross profit came in at $54.8 million, which inched up 0.5% from the prior-year quarter. Gross margin was 33.6% of net revenues, down 140 bps year over year.
Selling, general and administrative expenses totaled $29.2 million, up 9% year over year. Operating income in the fourth quarter was $25.7 million, down 7.7% from the year-ago quarter. Operating margin was 15.7%, down 220 bps from the prior-year quarter.
Financial Update
Cash and cash equivalents as of Dec 31, 2019, amounted to $139.3 million, down 22.2% from the prior-year quarter.
Cumulative cash provided by operating activities at the end of the fourth quarter came in at $133.2 million, compared with $96.5 million reported in the year-ago quarter.
2020 Guidance
For 2020, the company anticipates revenues between $705 million and $715 million, indicating an improvement of 14.5-16.2% from prior year. The mid-point of $710 million is higher than the Zacks Consensus Estimate of $701.9 million.
Net income is expected in the band of $76-$80 million, suggesting growth of 10.1-15.9% from the previous year.
Adjusted EBITDA is expected in the range of $185-$192 million, suggesting growth of 12.8-17.1% from the year-ago comparable period.
Summing Up
HMS Holdings ended fourth-quarter 2019 on a weak note, wherein both earnings and revenues missed their respective Zacks Consensus Estimate. The stock continues to benefit from Analytical Services unit. Strong 2020 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 #2 (Buy).
Earnings of Other MedTech Majors at a Glance
Some other top-ranked stocks that reported solid results this earning season are Stryker Corporation (NYSE:SYK) , Accuray Incorporated (NASDAQ:ARAY) and IDEXX Laboratories, Inc. (NASDAQ:IDXX) . You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Stryker delivered fourth-quarter 2019 adjusted EPS of $2.49, outpacing the Zacks Consensus Estimate by 1.2%. Fourth-quarter reported revenues of $4.13 billion surpassed the Zacks Consensus Estimate by 0.7%. The company carries a Zacks Rank #2.
Accuray reported second-quarter fiscal 2020 adjusted earnings per share (EPS) of a penny, beating the Zacks Consensus Estimate of a loss of 7 cents. Net revenues of $98.8 million outpaced the Zacks Consensus Estimate by 0.3%. The company sports a Zacks Rank #1.
IDEXX Laboratories reported fourth-quarter 2019 adjusted EPS of $1.04, which beat the Zacks Consensus Estimate of 91 cents by 14.3%. Revenues were $605.4 million, surpassing the Zacks Consensus Estimate by 0.9%. The company carries a Zacks Rank of 2.
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