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Here's Why You Should Hold HealthEquity (HQY) Stock for Now

Zacks Equity Research

HealthEquity, Inc. HQY is expected to benefit from its fiscal third-quarter results. However, stiff rivalry in the industry is likely to hurt the stock.

The stock currently has a Zacks Rank #3 (Hold).

Price Performance

Over the past year, shares of HealthEquity have rallied 30.1% against the industry’s decline of 18.2%. The current level is also higher than the S&P 500 index’s 5.1% fall.

What’s Deterring the Stock?

HealthEquity faces stiff competition in the Medical Services market. The company’s direct competitors are HSA (Health Savings Account) custodians that include state or federally chartered banks, such as Webster Bank and Optum Bank along with non-bank custodians approved by the U.S. Treasury, such as Payflex Systems USA, Inc. In the United States, the current top HSA custodians are Alliant Credit Union, Bank of America, BenefitWallet, HSA Bank, Optum Bank, SelectAccount, The HSA Authority and UMB Bank.

Why Should You Retain HealthEquity?

In the third quarter of fiscal 2019, HealthEquity reported earnings of 28 cents per share which surpassed the Zacks Consensus Estimate of 25 cents. The bottom line was higher than the year-ago quarter’s earnings of 17 cents on revenue and margin expansion.

Revenues totaled $70.5 million, up 24.1% year over year. Moreover, the top line marginally exceeded the Zacks Consensus Estimate of $69.8 million.
Additionally, the total number of HSA, for which HealthEquity served as a non-bank custodian (HSA Members), was 3.7 million, up 22% year over year.

Reflective of these, HealthEquity has issued a solid guidance for fiscal 2019.

Notably, the company expects revenues in the range of $281-$285 million, up from $279-$285 million anticipated earlier.

Adjusted income is projected in the band of $68-$72 million, up from the previous guidance of $67-$71 million. Adjusted net income per share is expected in the range of $1.06-$1.13, up from $1.05-$1.11 stated previously.

HealthEquity, Inc. Price and Consensus


HealthEquity, Inc. Price and Consensus | HealthEquity, Inc. Quote

Which Way Are Estimates Headed?

For the fiscal fourth quarter, the Zacks Consensus Estimate for earnings is pegged at 20 cents, reflecting a year-over-year upside of 233.3%. The same for revenues is pinned at $73 million, showing an increase of 20.8% year over year.

For fiscal 2019, the Zacks Consensus Estimate for revenues is at $284.2 million, reflecting a rise of 23.8% year over year. The same for earnings stands at $1.12, showing growth of 107.4% year over year.

Key Picks

Some better-ranked stocks in the broader medical space are Integer Holdings Corporation ITGR, OPKO Health, Inc. OPK and Surmodics SRDX.

Integer Holdings, with a Zacks Rank #1 (Strong Buy), has an earnings growth rate of 31.2% for the next quarter. You can see the complete list of today’s Zacks #1 Rank stocks here.

OPKO Health’s long-term earnings growth rate is projected at 12%. The stock carries a Zacks Rank of 2 (Buy).

Surmodics’ long-term earnings growth rate is estimated at 10%. The stock carries a Zacks Rank #2.

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