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What's in the Cards for HealthEquity (HQY) in Q2 Earnings?

Zacks Equity Research

HealthEquity, Inc. HQY is scheduled to release second-quarter 2019 results on Sep 3, after the closing bell.

In the last reported quarter, the company delivered a positive earnings surprise of 20.6%. Further, it has an average four-quarter positive surprise of 19.2%.

Let's take a look at how things are shaping up prior to this announcement.

Which Way are Q2 Estimates Treading?

For the quarter to be reported, the Zacks Consensus Estimate for revenues is pegged at $85.4 million, indicating an improvement of 20.1% from the year-ago quarter. The consensus estimate for earnings per share is pegged at 35 cents, suggesting growth of 2.9% from the year-ago reported figure.

HealthEquity, Inc. Price and EPS Surprise

 

HealthEquity, Inc. Price and EPS Surprise

HealthEquity, Inc. price-eps-surprise | HealthEquity, Inc. Quote

Factors to Influence Q2

HealthEquity is likely to have witnessed Health Savings Account (HSA) member growth in the to-be-reported quarter, which in turn is expected to drive the company’s top line. Moreover, better-than-expected performance across segments – Service, Custodial and Interchange Revenues – is likely to contribute to revenue growth in the upcoming quarterly results.

In fact, for fiscal 2020, HealthEquity projects revenues in the range of $339-$345 million (up from the previously guided range of $333-$339 million). Consequently, we expect the to-be-reported quarter to exhibit a similar trend.

HealthEquity offers a unique suite of advisory services, which includes 401(K) solution that can reduce the cost, risk and work of managing a retirement plan. We expect this differentiated portfolio to boost the company’s overall performance.

Moreover, the company has likely to have experienced improved gross margin in the second quarter, driven by the increasing mix to custodial revenue and a higher yield on custodial cash assets.

For fiscal 2020, the company projects adjusted net income in the band of $83-$87 million (up from the previously guided range of $80-$84 million). Adjusted net income per share is expected in the $1.28-$1.34 range (up from the previous band of $1.23-$1.29 per share). Going by this projection, we expect a similar trend in the to-be-reported quarter.

However, stiff competition in the medical services market might mar the company’s overall performance in the to-be-reported quarter.

What Our Quantitative Model Suggests

Per our proven model, a stock needs to have a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to deliver a positive earnings surprise. This is not the case here as you will see below.

Earnings ESP: HealthEquity has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: HealthEquity carries a Zacks Rank #3.

Meanwhile, we caution against stocks with a Zacks Rank #4 (Sell) or 5 (Strong Sell) going into the earnings announcement, especially when the company is seeing negative estimate revision.

Peer Releases

Here are three stocks that reported solid results in this earnings season.

CONMED Corporation CNMD delivered second-quarter 2019 adjusted earnings per share of 56 cents, which beat the Zacks Consensus Estimate of 53 cents by 5.7%. Revenues of $238.3 million surpassed the Zacks Consensus Estimate by 2.2%. The company carries a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Baxter International Inc. BAX delivered third-quarter 2019 adjusted earnings of 89 cents per share, which surpassed the Zacks Consensus Estimate of 81 cents by 9.9%. Revenues of $2.84 billion outpaced the Zacks Consensus Estimate of $2.79 billion by 1.9%. The company carries a Zacks Rank #2.

Intuitive Surgical, Inc. ISRG reported third-quarter 2019 adjusted earnings per share of $3.25, which beat the Zacks Consensus Estimate of $2.85. Revenues were $1.1 billion, surpassing the Zacks Consensus Estimate of $1.03 billion. The company carries a Zacks Rank #2.

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