A month has gone by since the last earnings report for Change Healthcare (CHNG). Shares have added about 0.5% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Change Healthcare 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 drivers.
Change Healthcare Q4 Earnings Miss Estimates, Revenues Top
Change Healthcare Inc.reported fourth-quarter fiscal 2022 adjusted earnings per shareof 39 cents, which missed the Zacks Consensus Estimate of 43 cents by 9.3%. The bottom line declined 7.1% on a year-over-year basis.
Net income per share was 2 cents in the quarter, against the year-ago quarter’s net loss per share of 4 cents.
Revenues rose 7.6% from the prior-year period to $920.1 million in the reported quarter. The top line outpaced the Zacks Consensus Estimate by 1.8%.
For the full-year 2022, the company reported revenues of $3.48 billion, up 12.6% from the prior-year quarter. The figure beat the consensus mark by 0.6%.
Change Healthcare operates through three segments — Software and Analytics, Network Solutions, Technology-Enabled Services and Postage and Eliminations.
Software and Analytics
Revenues at this segment totaled $443.2 million, up 6.5% on a year-over-year basis.
Revenues at this segment were $216.4 million, up 9.1% year over year.
Revenues at this segment were $234.3 million, up 3.1% on a year-over-year basis.
Postage and Eliminations
Revenues at this segment totaled $26.3 million, up 12.4% year over year.
Total operating expenses were $867.3 million, up 6.6% from the prior-year quarter.
In the quarter under review, Change Healthcare reported an operating income of $52.8 million, compared with $41.7 million in the year-ago quarter.
The company exited the quarter with cash and cash equivalents of $252.3 million, compared with $96 million in the preceding quarter.
Cumulative net cash provided by operating activities at the end of the fiscal fourth quarter amounted to $696.9 million compared with $586.2 million in the year-ago period.
Given the proposed merger agreement (with OptumInsight), Change Healthcare will not be issuing financial guidance going forward.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
The consensus estimate has shifted -20.86% due to these changes.
At this time, Change Healthcare has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. Following the exact same course, 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.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Change Healthcare has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.