LHC Group (LHCG) Loses 1.1% In Spite of Q1 Earnings Beat

·5 min read

Shares of LHC Group, Inc. LHCG have lost 1.1% on May 10, following the company's first-quarter 2021 results.

The company reported first-quarter 2021 adjusted earnings per share (EPS) of $1.39, which surpassed the Zacks Consensus Estimate of $1.26 by 10.3%. Moreover, the bottom line soared 85.3% year over year.

Revenue Details

The company reported net service revenues of $524.8 million in the quarter, which missed the Zacks Consensus Estimate by 0.02%. Nonetheless, the top line improved 2.3% on a year-over-year basis.

Q1 Highlights

In the quarter under review, total organic growth in home health admissions declined 0.4% year over year, while organic growth in hospice admissions climbed 7.6%.

LHC Group, Inc. Price, Consensus and EPS Surprise

LHC Group, Inc. Price, Consensus and EPS Surprise
LHC Group, Inc. Price, Consensus and EPS Surprise

LHC Group, Inc. price-consensus-eps-surprise-chart | LHC Group, Inc. Quote

Home health service revenues were $373.8 million, up 1.6% year over year. Meanwhile, hospice services revenues amounted to $62.7 million, up 3.6%.

Business Update

Presently, LHC Group's acquisition pipeline stands at above $502 million with over $300 million of the targets in exclusive discussions, thereby indicating the company’s confidence in achieving or exceeding its target of $150 million to $200 million in acquired revenues in 2021.

Margin Analysis

Gross profit in the quarter totaled $214.6 million, up 11.9%. Gross margin in the reported quarter was 40.9%, which expanded 350 basis points (bps) on a year-over-year basis.

Operating profit was $51.1 million, up 51.3% from the prior-year quarter. Operating margin was 9.7%, up 310 bps.

Financial Position

LHC Group exited the first quarter with cash amounting to $292.3 million, compared with $286.6 million sequentially.

Net cash provided by operating activities at the end of the first quarter totaled $44.8 million, compared to net cash used in operating activities of $24.5 million.

2021 Guidance Raised

LHC Group raised its 2021 outlook to take into consideration the extension of the Public Health Emergency to Jul 20, 2021 as well as the suspension of Medicare sequestration to Dec 31, 2021.

For full-year 2021, the company now projects net service revenues between $2.22 billion and $2.27 billion (up from the previously guided range of $2.2-$2.26 billion). The Zacks Consensus Estimate for the same is pegged at $2.22 billion.

Adjusted EPS is projected to be $6.20-$6.40 (up from the prior guided range of $5.65-$5.90). The consensus mark for the same stands at $6.01 per share.

Wrapping Up

LHC Group exited the first quarter on a mixed note, wherein earnings beat the Zacks Consensus Estimate but revenues missed the same. The company continues to gain from hospice admissions that witnessed organic growth on a year-over-year basis. Increase in the bottom line buoys optimism. LHC Group's acquisition pipeline of above $502 million with over $300 million of the targets in exclusive discussions is encouraging. Expansion in both gross and operating margins bodes well.

However, the company witnessed decline in organic growth with respect to home health admissions in the quarter under review. Further, a highly competitive home healthcare market remains a woe.

Zacks Rank

LHC Group carries a Zacks Rank #3 (Hold).

Earnings of Other MedTech Majors at a Glance

Some better-ranked stocks in the broader medical space that have already announced their quarterly results are Integer Holdings Corporation ITGR, Boston Scientific Corporation BSX and HCA Healthcare, Inc. HCA, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Integer Holdings reported first-quarter 2021 adjusted EPS of 97 cents, which surpassed the Zacks Consensus Estimate by 12.8%. First-quarter revenues of $290.5 million outpaced the Zacks Consensus Estimate by 2.6%.

Boston Scientific reported first-quarter 2020 adjusted EPS of 37 cents, which beat the Zacks Consensus Estimate by 32.1%. First-quarter revenues of $2.75 billion outpaced the consensus mark by 5.3%.

HCA Healthcare reported first-quarter 2021 adjusted EPS of $4.14, surpassing the Zacks Consensus Estimate by 23.6%. Net revenues of $14 billion exceeded the Zacks Consensus Estimate by 2.2%.

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