Why HealthEquity Stock Sank This Week
Key Points
HealthEquity posted significant sales and earnings beats with its fiscal Q2 report.
The company issued a small increase for its full-year guidance, but management kept its forecast for adjusted earnings per share the same.
Investors were looking for stronger guidance from the company.
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HealthEquity (NASDAQ: HQY) stock got hit with a substantial sell-off this week even though the company delivered sales and earnings beats with its quarterly report. The healthcare financial services specialist's share price closed out the week down 8.6% and had been off as much as 12% from its level at the end of the previous week's market close.
HealthEquity released results for the second quarter of its current fiscal year before the market opened on Thursday. The company's fiscal Q2 period wrapped on July 31, and results for the period came in ahead of the average Wall Street targets. Despite strong performance in the quarter, the stock sold off this week.
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HealthEquity posted encouraging fiscal Q2 results
Prior to the company's fiscal Q2 report, HealthEquity stock was trading in the neighborhood of its 52-week high. Shares are still up roughly 8% year to date even after this week's significant pullback.
In fiscal Q2, the business posted non-GAAP (adjusted) earnings per share of $1.24 on sales of $350.7 million. Adjusted earnings topped the average analyst forecast by $0.05 per share, and revenue came in roughly $1.5 million higher than the average target. Sales were up 7.6% year over year in the quarter, and adjusted earnings per share rose approximately 15.7%. Despite fiscal Q2 performance coming in above the average Wall Street targets, some investors were looking for even stronger performance.
HealthEquity's guidance wasn't strong enough for investors
With its fiscal Q2 results tallied, HealthEquity narrowly raised its sales target for the full fiscal year. The company is now targeting full-year revenue between $1.411 billion and $1.421 billion -- slightly ahead of its previous guidance for sales between $1.41 billion and $1.42 billion. The average analyst estimate had called for sales of $1.42 billion, and the company's marginal target increase didn't look significant in the context of that forecast.
Meanwhile, the company reiterated guidance for adjusted earnings per share to be between $4.66 and $4.73. For comparison, the average analyst estimate had called for adjusted earnings per share of $4.72 for the year. HealthEquity's fiscal Q2 results suggest that the company could still be on track to hit the high end of its guidance range, but many investors were apparently looking for a stronger forecast from management this week.
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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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