What happened
After reporting second-quarter results that fell short of expectations, shares of Healthcare Services Group (HCSG -1.69%) -- a provider of outsourced housekeeping and dining services for the healthcare industry -- fell 22% as of 1:15 p.m. EDT on Wednesday.
So what
The headline numbers from the period were pretty rough:
- Revenue dropped 8% to $462 million.
- Earnings per share fell 31% to $0.24. That was well below the $0.34 in EPS that Wall Street was expecting.
Management stated that the revenue decline was primarily attributable to previously announced customer problems. They also admitted that it remains "a tough environment for the industry."
In response to the weak quarterly results, traders are mauling the shares.
Image source: Getty Images.
Now what
While it was a rough quarter, there were a few notable bright spots. More than half of Healthcare Services Group customers have been transitioned to an accelerated payment model, which should help with cash collections. Its cost of service also improved 300 basis points sequentially to 86.7%, which is near management's goal of 86%. The quarterly dividend was also raised slightly, for the 65th consecutive increase.
CEO Ted Wahl also had some upbeat industry news to share with investors: "[T]he Patient Driven Payment Model and 2.5% increase in Medicare reimbursement, both starting in October, along with improving occupancy trends, will go a long way in strengthening the industry heading into 2020."
All of those positives are falling on deaf ears today, which makes sense given the large quarterly miss. Today's drop could represent a nice chance to buy into this dependable business at a discount, but that will only work out for investors if management can return this business to growth.
