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Why Is LHC (LHCG) Up 4% Since Last Earnings Report?

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Zacks Equity Research
·4 min read
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A month has gone by since the last earnings report for LHC Group (LHCG). Shares have added about 4% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is LHC due for a pullback? 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 catalysts.

LHC Group Q4 Earnings Beat Estimates, Revenues Miss

LHC Group, Inc.’s fourth-quarter 2020 adjusted earnings per share of $1.40 surpassed the Zacks Consensus Estimate of $1.37 by 2.2%. Moreover, the bottom line improved 21.7% year over year.

For the full-year 2020, the company reported adjusted earnings per share of 5.01, up 12.1% from the previous year. The figure beat the consensus mark by 0.2%.

Revenue Details

The company reported net service revenues of $532.3 million in the quarter, which missed the Zacks Consensus Estimate by 0.3%. Nonetheless, the top line inched up 0.2% on a year-over-year basis.

For the full-year 2020, the company delivered net service revenues of $2.06 billion, which matched the consensus mark but were down 0.8%.

Q4 Highlights

In the quarter under review, total organic growth in home health admissions rose 2.2% year over year, while organic growth in hospice admissions climbed 10.9%.

However, home health service revenues were $382.6 million, down 1.8% year over year. Meanwhile, hospice services revenues amounted to $62.4 million, up 7.4%.

Business Update

On Oct 1, 2020, the company finalized a joint venture (JV) with University Health Care System to bolster home health and hospice services in Georgia and South Carolina. The company anticipates this joint venture to account for almost $8.3 million in incremental annualized revenues. In the same month, the company finalized a JV with Northeast Georgia Health System in order to share ownership of SunCrest Home Health in Gainesville, GA.

On Nov 1, 2020, LHC Group finalized an expansion of JV with CHRISTUS Health via an agreement of adding a hospice provider in San Marcos, TX. The company anticipates this JV to account for almost $1.6 million in incremental annualized revenues.

On Dec 31, 2020, announced its decision to acquire Tulsa, OK-based Grace Hospice of Oklahoma and Mesa, AZ-based Valley Hospice and East Valley Palliative Care. The company anticipates the purchase Grace Hospice to generate almost $12.1 million in annualized revenues, while Valley Hospice and East Valley Palliative Care to generate about $4.8 million in annualized revenues.

Margin Analysis

Gross profit in the quarter totaled $215.1 million, up 14.4%. Gross margin in the reported quarter was 40.4%, which expanded 500 basis points (bps) on a year-over-year basis.

Operating profit was $50.9 million, up 56.8% from the prior-year quarter. Operating margin was 9.6%, down 350 bps.

2021 Guidance

For first-quarter 2021 the company anticipates net service revenues to be $515-$530 million. The Zacks Consensus Estimate for the same is pegged at $543.2 million.

Adjusted earnings per share is projected to be $1.20-$1.30. The consensus mark for the same is pegged at $1.39 per share.

For full-year 2021, the company projects net service revenues between $2.2 and $2.26 billion. The Zacks Consensus Estimate for the same is pegged at $2.24 billion.

Adjusted earnings per share is projected to be $5.65-$5.90. The consensus mark for the same stands at $5.99 per share.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision. The consensus estimate has shifted -9.45% due to these changes.

VGM Scores

At this time, LHC has a great Growth Score of A, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

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

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise LHC has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.


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