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Why Is HealthEquity (HQY) Down 11.5% Since Last Earnings Report?

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Zacks Equity Research
·3 min read
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It has been about a month since the last earnings report for HealthEquity (HQY). Shares have lost about 11.5% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is HealthEquity due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

HealthEquity Q2 Earnings and Revenues Beat Estimates

HealthEquity, Inc reported adjusted earnings per share of 42 cents in second-quarter fiscal 2021, which beat the Zacks Consensus Estimate of 27 cents by 55.6%. The bottom line fell 4.5% on a year-over-year basis.

Revenues in Detail

The company generated revenues of $176 million, beating the Zacks Consensus Estimate by 2.7%. However, the figure skyrocketed 103% from the prior-year quarter.

HSA Member Detail

As of Jul  31, 2020, the total number of Health Savings Accounts (HSA), for which HealthEquity served as a non-bank custodian (HSA members), was 5.4 million, up 29% year over year.

Additionally, total Active HSA assets were $12.2 billion, up 43% year over year.

Total Accounts, including HSAs and complementary CDB accounts, came in at 12.5 million, up 158% year over year.

Segmental Performance

Service Revenues: At this segment, revenues totaled $103.8 million, up 294.7% from the year-ago figure.

Custodial Revenues: At this segment, revenues grew 7.6% year over year to $46.9 million.

Interchange Revenues: At this segment, revenues soared 51.4% year over year to $25.3 million.

Margin Details

HealthEquity generated gross profit of $101.8million, up 74.2% from the year-ago quarter. Gross margin was 57.8% of net revenues, down 965basis points (bps) year over year.

Adjusted operating profit in the fiscal second quarter was $50.6 million, up 34.9% year over year. Adjusted operating margin totaled 28.8% in the quarter, contracting 1456 bps year over year.

Financial Position

The company exited the fiscal second quarter with cash and cash equivalents of $268.9 million, compared with $720.8 million at the end of the fiscal first quarter.

Cumulative cash flow from operating activities in the second quarter came in at $68.7 million, up from $56.8 million in the year-ago period.

2021 Guidance

For fiscal 2021, revenues are projected within $720 million and $730 million. The Zacks Consensus Estimate for the same is pegged at $738.6 million.

Adjusted earnings per share are expected within $1.48 and $1.58. The Zacks Consensus Estimate for the same is pegged at $1.44.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates flatlined during the past month. The consensus estimate has shifted 18.7% due to these changes.

VGM Scores

Currently, HealthEquity has an average Growth Score of C, however its Momentum Score is doing a lot better with an A. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

HealthEquity has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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