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Why Is LHC (LHCG) Down 1.7% Since Last Earnings Report?

Zacks Equity Research

A month has gone by since the last earnings report for LHC Group (LHCG). Shares have lost about 1.7% in that time frame, underperforming the S&P 500.

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

LHC Group Q2 Earnings Beat Estimates, Revenues Miss

LHC Group second-quarter 2019 adjusted earnings per share (EPS) of $1.07 beat the Zacks Consensus Estimate of $1.00 and improved 27.4% year over year.

The Zacks Rank #3 (Hold) company reported revenues worth $517.8 million in the quarter, which missed the Zacks Consensus Estimate by 0.8%. However, the top line improved 3.2% on a year-over-year basis.

Q2 Highlights

In the quarter under review, total growth in home health admissions was 1.4% year over year and organic growth was 9.1%.

Total growth in home health revenues was 4.2% year over year and organic growth was 6.6%. While growth in hospice admissions was 2.4% year over year, organic growth advanced 9.6%.

Notably, the company realized approximately $7.8 million in pre-tax synergies in the second quarter from its acquisition of Almost Family. Year to date, the company agreed to acquire 15 home health, hospice or home and community-based services locations, the majority of which are hospital joint ventures.

Margin

Gross profit in the quarter totaled $191.9 million, up 6.1%. Gross margin in the quarter was 37.1%, up 100 bps.

Operating income came in at $42.4 million, up 36.6% from the year-ago quarter’s $31 million. Operating margin was 8.2%, up 200 bps.

Guidance Affirmed

LHC Group affirmed guidance for 2019.

The company expects revenues in the band of $2.09-$2.14 billion. The Zacks Consensus Estimate stands at $2.11 billion, within the guided range.

Adjusted EPS is expected between $4.25 and $4.35. The Zacks Consensus Estimate is pegged at $4.30, within the projected range.

Adjusted EBITDA is projected to be in the range of $214 million to $220 million.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

VGM Scores

At this time, LHC has a nice Growth Score of B, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. 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. Notably, LHC has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.



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