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Here's Why HealthEquity Stock Is Surging Today

By Brian Feroldi - Dec 4, 2019 at 10:09AM

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The company reported upbeat quarterly results and boosted full-year guidance.

What happened

Shares of HealthEquity ( HQY -4.13% ) are surging today, up by 9% as of 10:06 a.m. EST, after the provider of various consumer-directed benefit accounts posted a better-than-expected third-quarter report.  

So what

HealthEquity's Q3 results were solid across the board:

  • Revenue skyrocketed 123% to $157.1 million. The triple-digit growth is a result of the recent acquisition of WageWorks, which closed on Aug. 30. That was ahead of the $152.1 million in revenue that Wall Street had expected.
  • Health savings account (HSA) membership jumped 37% to 5 million. 
  • Custodial assets under management soared 48% to $10.5 billion.
  • Net loss came in at $21.3 million, or $0.30 per share.
  • Non-GAAP net income grew 65% to $32.8 million, or $0.47 per share. That blew past analysts' consensus estimate for $0.22 per share.
Piggy bank with the letters HSA written on the side next to a stethoscope

Image source: Getty Images.

Management boosted its full-year guidance, too:

  • Revenue is now expected to land between $520 million and $526 million, exceeding Wall Street's current estimate of $517.3 million.
  • Net income should come in between $16 million and $20 million, or $0.24 to $0.28 per share.
  • Non-GAAP net income is expected to be in the range of $101 million to $105 million, or $1.46 to $1.52 per share. That's also much higher than the $1.28 per share consensus estimate in the analyst community.

Given the strong quarterly results and guidance, it's easy to understand why shares are flying high today.

Now what

CEO Jon Kessler stated: "The new HealthEquity outperformed in a market that keeps growing, and got a fast start on the integration of WageWorks to continue that growth. For the full year, these results set the team up to deliver strong sales while keeping its commitments to customers, partners and shareholders."

On the conference call with analysts, management said that HealthEquity has already achieved about $15 million of run-rate synergies. The company now expects to meet its original goal of $50 million in run-rate cost savings by the end of fiscal 2021, which is earlier than originally expected.

Overall, this growth stock's numbers are heading in the right direction and the acquisition integration looks like it's on track. Shareholders have every reason to believe that the good times can continue from here.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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