LHC Group (LHCG) Stock Loses 11.9% Despite Q2 Earnings Beat
Shares of LHC Group, Inc. LHCG have lost 11.9% on Aug 5, following the company's second-quarter 2021 results.
The company reported second-quarter 2021 adjusted earnings per share (EPS) of $1.62, which surpassed the Zacks Consensus Estimate of $1.55 by 4.5%. The bottom line improved 31.7% year over year.
GAAP EPS was $1.23 in the quarter under review, down 16.1% on a year-over-year basis.
Revenue Details
The company reported net service revenues of $545.9 million in the quarter, which missed the Zacks Consensus Estimate by 1%. However, the top line improved 12% on a year-over-year basis.
Q2 Highlights
In the quarter under review, total organic growth in home health admissions rose 16.4% year over year, while organic growth in hospice admissions climbed 11%.
However, home health service revenues were $396.5 million, up 16.7% year over year. Meanwhile, hospice services revenues amounted to $63.8 million, up 4.5%.
Business Update
Presently, LHC Group's acquisition pipeline stands at above $400 million with over $300 million of the targets in exclusive discussions, thereby indicating the company’s confidence to raise its target to a range of $350-$500 million in acquired revenues in 2021 (up from the prior range of $150 million to $200 million).
LHC Group, Inc. Price, Consensus and EPS Surprise
LHC Group, Inc. price-consensus-eps-surprise-chart | LHC Group, Inc. Quote
On a year-to-date basis, the company has completed or announced the buyout of 26 hospice locations, three home health locations and one Home and Community Based Services (HCBS) location in 11 states, thereby demonstrating annualized revenues of $161.7 million.
Margin Analysis
Gross profit in the quarter totaled $228 million, up 26.3%. Gross margin in the reported quarter was 41.8%, which expanded 470 basis points (bps) on a year-over-year basis.
Operating profit was $60.2 million, down 18.5% from the prior-year quarter. Operating margin was 11%, down 420 bps.
Financial Position
LHC Group exited the second quarter with cash amounting to $112.1 million, down from $292.3 million sequentially.
Cumulative net cash used in operating activities at the end of the second quarter totaled $11.8 million, against net cash provided in operating activities of $435.9 million.
2021 Guidance
LHC Group raised 2021 earnings outlook and now projects adjusted EPS to be $6.30-$6.50 (up from the prior guided range of $6.20-$6.40). The consensus mark for the same stands at $6.36 per share.
For full-year 2021, the company affirmed its net service revenues between $2.22 billion and $2.27 billion. The Zacks Consensus Estimate for the same is pegged at $2.25 billion.
Wrapping Up
LHC Group exited the second quarter on a mixed note, wherein earnings beat the Zacks Consensus Estimate but revenues missed the same. The company continues to gain from home health as well as hospice admissions that witnessed organic growth on a year-over-year basis. Increase in the bottom line buoys optimism. LHC Group's acquisition pipeline of above $400 million with over $300 million of the targets in exclusive discussions is encouraging. Expansion in gross margins bodes well.
Nevertheless, contraction in operating margin is concerning. The company also witnessed a decline in operating profit in the quarter under review. A highly competitive home healthcare market remains a woe.
Zacks Rank
LHC Group carries a Zacks Rank #3 (Hold).
Earnings of Other MedTech Majors at a Glance
Some better-ranked stocks in the broader medical space that have already announced their quarterly results are Encompass Health Corporation EHC, West Pharmaceutical Services, Inc. WST and DENTSPLY SIRONA Inc. XRAY, each carrying a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Encompass Health reported second-quarter 2021 adjusted EPS of $1.17, which beat the Zacks Consensus Estimate by 15.8%. Second-quarter revenues of $1.3 billion outpaced the consensus mark by 1.5%.
West Pharmaceutical reported second-quarter 2021 adjusted EPS of $2.46, which surpassed the Zacks Consensus Estimate by 41.4%. Second-quarter revenues of $723.6 million outpaced the Zacks Consensus Estimate by 8.7%.
DENTSPLY SIRONA reported second-quarter 2021 adjusted EPS of 71 cents, which beat the Zacks Consensus Estimate by 9.2%. Second-quarter revenues of $1.07 billion outpaced the consensus mark by 6.9%.
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