HealthEquity Inc.HQY reported earnings of 27 cents per share in the second quarter of fiscal 2018, surpassing the Zacks Consensus Estimate of 14 cents. The figure was higher than the year-ago earnings of 14 cents on revenue and margin expansion.
Shares of HealthEquity have gained only 3.5% of its value year to date, comparing unfavorably with the industry 's gain of 4.6% to which it belongs to.
Revenues during the said quarter amounted to $56.9 million, reflecting an increase of 29% year over year and surpassing the Zacks Consensus Estimate of $56.0 million. Service (40% of total revenues), Custodial (37%) and Interchange (23%) revenues were up 21%, 44% and 21% year over year, respectively.
The growth in service revenues was driven by year-over-year increase in average health savings account (HSA) which was offset by a decrease in service revenue per average HSA. The decline was led by the company's strategy of offering lower service fees per HSA for more volume from network partners, particularly with higher balances. HealthEquity stated that the profitability of HSA in this business model increases as balances grow.
The growth in Custodial revenues was supported by higher average daily cash AUM. The strong year-over-year growth in Interchange revenues was driven by increased card spending and more favorable interchange terms (higher spend volume).
As of Jul 31, 2017, total number of HSA members - for which the company serves as a non-bank custodian - increased 26% year over year to 2.9 million. Total assets under management (AUM) surged 28% year over year to $5.4 billion.
HealthEquity, Inc. Price, Consensus and EPS Surprise
As of Jul 31, 2017, the company had $169.7 million of cash, cash equivalents and marketable securities without any outstanding debt. This compares favorably with $140.0 million in cash, cash equivalents and marketable securities and no outstanding debt as of Jan 31, 2017.
For fiscal 2018 (ending Jan 31, 2018), HealthEquity forecasts revenues in the range of $223-$228 million. Net income is forecasted in the range of $41.0 million to $45.0 million, resulting in a net income per diluted share range of 64 cents to 68 cents. Adjusted EBITDA outlook is estimated in the band of $79.0 million to $84.0 million. The business outlook for the fiscal ending Jan 31, 2018 assumes a projected effective income tax rate of approximately 38%.
Zacks Rank and Key Picks
Currently, HealthEquity has a Zacks Rank #3 (Hold). A few better-ranked medical stocks are Edwards Lifesciences Corporation EW , Lantheus Holdings, Inc. LNTH and IDEXX Laboratories, Inc. IDXX . Edwards Lifesciences sports a Zacks Rank #1 (Strong Buy), while Lantheus Holdings and IDEXX Laboratories carry a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here .
Edwards Lifesciences has a long-term expected earnings growth rate of 15.2%. The stock has rallied roughly 25.9% over the last six months.
Lantheus Holdings has a long-term expected earnings growth rate of 12.5%. The stock has gained 25.8% over the last six months.
IDEXX Laboratories has a long-term expected earnings growth rate of 19.8%. The stock has gained around 5.4% over the last six months.
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