IBD 50 stock HealthEquity (HQY) easily beat first-quarter earnings forecasts after the close Monday and raised its full-year guidance, as membership in health savings accounts grows.


Estimates: Wall Street expects the health savings account custodian’s EPS to jump 16% to 22 cents as revenue vaults 25% to $69 million, according to Zacks Investment Research.

Results: EPS of 31 cents on revenue of $69.9 million. Service revenue increased 10% to $24.8 million, custodial revenue jumped 47% to $28.4 million, and interchange revenue rose 22% to $16.6 million. HSA members increased 24% to 3.5 million.

Total custodial assets grew 31% to $6.9 billion, with custodial cash assets up 24% to $5.5 billion and custodial investment assets up 75% to $1.4 billion.

Outlook: HealthEquity now see full-year EPS of $1.00-$1.06, largely above consensus of $1.10 and up from a prior view of 98 cents-$1.04. Management sees full-year revenue of $278 million-$284 million, with the midpoint about in line with consensus of $280 million and up from a prior view of $276 million-$282 million.

Stock: HealthEquity rallied 5% late. Shares closed up 0.35% at 76.36 on the stock market today but just 2% off their all-time high. HealthEquity stock, which ranked No. 19 on the IBD 50, has rocketed by more than 60% since the start of the year, and is extended from a five-week flat base. A good earnings beat could see it smash through into profit-taking zone, though poor results would see it pare gains. After beating Q4 results in March, HealthEquity surged 11.5%.

A common pitfall for new and experienced investors alike is to buy a stock just ahead of its earnings report because it’s “acting right,” which is why IBD introduced an options strategy to limit risk around earnings.

HealthEquity Shows Leadership

HealthEquity is a top company in the health savings account, or HSA, space, and it currently holds first place in the Commercial Services-Outsourcing industry group.

In addition, it boasts a 98 out of a highest-possible 99 IBD Composite Rating, putting it in the top 2% of stocks. The rating is a blend of key fundamental and technical metrics to measure a stock’s leadership potential.

Back in February, the HSA custodian’s stock plunged amid concerns over enrollment growth, but it rebounded and more than recouped its losses.

And back in March the good news continued, as it beat fourth-quarter estimates while HSA assets and accounts both jumped.


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