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Healthways (HWAY) Misses Q3 Earnings, Revenue Estimates

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Headquartered in Franklin, TN, Healthways, Inc. (HWAY - Free Report) reported third-quarter 2016 earnings of 30 cents per share, which missed the Zacks Consensus Estimate by 23 cents. However, earnings improved a stellar 114.2% on a year-over-year basis.

The upside was driven by a 10.3% rise in revenues to approximately $125 million. However, the revenue figure missed the estimated mark of $126 million.

Meanwhile, Healthways represents a stupendous one-year return of 71.3%, much better then S&P 500’s negative 0.21% over the same time frame.

Quarter Highlights

In the third quarter, Healthways commenced the restructuring of the corporate support infrastructure (IT infrastructure, separate back office, rebranding company), which is now anticipated to cost roughly $6 million to $7 million compared with an initial estimate of $5 million to $7 million.

Healthways witnessed solid demand in the Medicare Advantage, Medicare Supplemental and commercial health plan markets.

Quarter Details

Taking the continuing operations into consideration, Healthways registered an EBITDA of $24.4 million compared with $28.2 million in the same quarter last year. Notably, this included restructuring costs, business separation costs and colleague incentive compensation accruals worth $1.1 million, $0.7 million and $1.9 million. Excluding restructuring and business separation expenses, EBITDA margin stood at 21% in the quarter.

Selling, general & administrative expenses (SG&A), as a percentage of revenues, increased 270 basis points (bps) from the year-ago quarter to 8.3%. Cost of services, as a percentage of revenues, surged 160 bps to 71.3% while depreciation expenses contracted 40 bps to 1.3%.

Going ahead, Healthways is set to focus exclusively on the three business units – network solutions, SilverSneakers and Prime and Physical Medicine. The Medicare Advantage Plan is also expected to perform well under the Medicare star rating system.

Guidance

For full-year 2016, management expects revenues to exceed $500 million. Coming to EBITDA margins, management expects margins to be above 20%, excluding restructuring and business separation costs. Organic growth is forecasted in the upper-single digit range for Healthways.

HEALTHWAYS INC Price, Consensus and EPS Surprise

 

HEALTHWAYS INC Price, Consensus and EPS Surprise | HEALTHWAYS INC Quote

Zacks Rank & Other Key Picks

Currently, Healthways carries a Zacks Rank #2 (Buy).

Other favorably ranked ranked stocks in the broader medical sector are Intuitive Surgical Inc. (ISRG - Free Report) , AngioDynamics Inc. (ANGO - Free Report) and C.R. Bard .

Notably, Intuitive Surgical and AngioDynamics sport a Zacks Rank #1 (Strong Buy), while C.R. Bard has a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Intuitive Surgical has a long-term expected earnings growth rate of approximately 11.35%. The stock represents an impressive one-year return of approximately 32.9%.

AngioDynamics has a long-term expected earnings growth rate of 15.00%. The company posted a solid one-year return of almost 23.14%.

C.R. Bard recorded a stellar one-year return of almost 15.02%. Notably, the company has an impressive long-term expected growth rate of 11.16%.

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