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LHC Group (LHCG) Q2 Earnings Beat Estimates, Revenues Miss

Zacks Equity Research

LHC Group, Inc.’s LHCG second-quarter 2020 adjusted earnings per share (EPS) of $1.23 surpassed the Zacks Consensus Estimate of 75 cents by 64%. Moreover, the bottom line improved 14.9% year over year.

The company reported net service revenues of $487.3 million in the quarter, which missed the Zacks Consensus Estimate by 1.1%. Further, the top line declined 5.9% on a year-over-year basis.

Q2 Highlights

In the quarter under review, total organic growth in home health admissions fell 4.7% year over year due to the impact of the COVID-19 pandemic, while organic growth in hospice admissions climbed 1.8%. Home health service revenues were $339.9 million, down 9.4% year over year, while hospice services revenues amounted to $61.1 million, up 10.9%.

LHC Group, Inc. Price, Consensus and EPS Surprise

LHC Group, Inc. Price, Consensus and EPS Surprise
LHC Group, Inc. Price, Consensus and EPS Surprise

LHC Group, Inc. price-consensus-eps-surprise-chart | LHC Group, Inc. Quote

On Aug 1, 2020, LHC Group finalized a joint venture with Orlando Health to boost home health and home and community based services (HCBS) in the state of Florida. The company anticipates that this joint venture will account for almost $3.5 million in incremental annualized revenues.

Margin Analysis

Gross profit in the quarter totaled $180.6 million, down 5.9%. Gross margin in the reported quarter was 37.1%, which remained flat on a year-over-year basis.

Operating profit came in at $73.9 million, up 74.3% from the prior-year quarter. Operating margin was 15.2%, up 700 basis points (bps).

2020 Guidance

Due to the uncertainty regarding the impact and disruption caused by COVID-19, the company withdrew its 2020 guidance during the first quarter. However, the company has decided to reinstate full-year 2020 guidance during the quarter under review.

For full-year 2020, the company projects net service revenues between $2 billion and $2.05 billion. The Zacks Consensus Estimate for the same is pegged at $2.11 billion.

Adjusted EPS is expected in the range of $4.60-$4.80. The consensus mark for the same is pegged at $4.26 per share.

Wrapping Up

LHC Group exited the second quarter on a mixed note. The company continues to gain from hospice admissions, which rose year over year in the reported quarter. Increase in the bottom line buoys optimism. LHC Group is also anticipated to gain from joint ventures. Expansion is operating margin is encouraging.

However, the company witnessed decline in home health service revenues in the quarter under review. Further, a highly competitive home healthcare market adds to the woes.

Zacks Rank

LHC Group carries a Zacks Rank #3 (Hold).

Key Picks

Some better-ranked stocks in the broader medical space are Thermo Fisher Scientific Inc. TMO, PerkinElmer, Inc. PKI and West Pharmaceutical Services, Inc. WST. While both PerkinElmer and West Pharmaceuticals sport a Zacks Rank #1 (Strong Buy), Thermo Fisher carries a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Thermo Fisher reported second-quarter 2020 adjusted EPS of $3.89, beating the Zacks Consensus Estimate by 45.7%. Revenues of $6.92 billion outpaced the consensus mark by 0.1%.

PerkinElmer reported second-quarter 2020 adjusted EPS of $1.57, surpassing the Zacks Consensus Estimate by 68.8%. Revenues of $811.7 million outpaced the consensus mark by 1.3%.

West Pharmaceuticals reported second-quarter 2020 adjusted EPS of $1.25, outpacing the Zacks Consensus Estimate of 91 cents. Revenues of $527.2 million surpassed the consensus estimate by 6.9%.

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