LHC (LHCG) Up 0.2% Since Last Earnings Report: Can It Continue?

A month has gone by since the last earnings report for LHC Group (LHCG). Shares have added about 0.2% 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 the most recent earnings report in order to get a better handle on the important drivers.

LHC Group Q4 Earnings Meet Estimates, Revenues Lag

LHC Group Inc.’s fourth-quarter 2019 adjusted earnings per share of $1.15 matched the Zacks Consensus Estimate. However, the bottom line improved 11.7% year over year.

For the full year, adjusted EPS was $4.47, up 25.9% from that of 2018. The figure also beat the consensus mark by 0.2%.

Revenues in Detail

The company reported net service revenues of $531.3 million in the quarter, which missed the Zacks Consensus Estimate by 1.9%. However, the top line improved 4.2% on a year-over-year basis.

For full-year 2019, the company reported net service revenues worth $2.08 billion, which improved 14.9% from the previous year. However, the top line missed the Zacks Consensus Estimate by 0.4%.

Q4 Highlights

In the quarter under review, total growth in home health admissions was 11.7% year over year and organic growth was 10.3%.

Total growth in home health revenues was 6.1% year over year and organic growth was 6.5%. While growth in hospice admissions was 9.7% year over year, organic growth advanced 5.6%.

During 2019 and year to date in 2020, the company acquired 27 home health, 11 hospice and three home and community-based services locations and one Long Term Acute Care (LTAC) hospital in 13 states and the District of Columbia, the majority of which are hospital joint ventures. These buyouts represent around $114.3 million in annualized revenues.

Margin

Gross profit in the quarter totaled $188 million, up 1.5%. Gross margin in the reported quarter was 35.4%, down 90 bps.

Operating income came in at $32.5 million, down 10.1% from the year-ago quarter’s $36.1 million. Operating margin was 6.1%, down 100 bps.

2020 Guidance

For full-year 2020, the company projects adjusted EPS to range between $4.60 and $4.80. The Zacks Consensus Estimate is pegged at $4.73.

LHC Group expects net service revenues in the band of $2.13-$2.18 billion in 2020. The Zacks Consensus Estimate stands at $2.23 billion.

For the full year, adjusted EBITDA is projected between $230 million and $240 million.

For first-quarter 2020, net service revenues are estimated to be in the band of $500-$510 million, while adjusted EPS is anticipated to be in the range of 70-80 cents. Adjusted EBITDA is projected to be in the range of $33 million to $40 million.

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 -22.65% due to these changes.

VGM Scores

At this time, LHC has a strong Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% 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 #3 (Hold). We expect an in-line return from the stock in the next few months.