HealthEquity Tops Q1 Earnings Expectations; Shares Open 6.5% Lower

he Nation’s largest health savings account (“HSA”) non-bank custodian, HealthEquity, Inc. (HQY), reported a decline in both quarterly earnings and revenue but beat analysts’ expectations. Shares opened 6.5% lower on Tuesday.

The company reported earnings of $0.38 per share, down 11.6% compared to the prior-year quarter. However, earnings beat analysts’ estimates of $0.32 per share.

Revenue was down 3% to $184.20 million year-over-year but surpassed the Street’s estimates of $180.84 million. Compared to the year-ago period, Service revenue fell 7.8% to $102.53 million, Custodial revenue remained flat at $46.98 million, and Interchange revenue was up 8.9% to $34.69 million.

HSAs grew 9% to 5.8 million, total HSA assets grew 31% to $15 billion, and the company’s total accounts grew 1% to 12.8 million, including both HSAs and $7 million of consumer-directed benefits (CDB) accounts. (See HealthEquity stock analysis on TipRanks)

Jon Kessler, President and CEO of the company said, “Our fiscal year 2022 is off to a fast start with early sales wins, two material acquisition agreements in our core HSA business, and the new Luum mobility benefits platform helping clients return to work.”

For the full Fiscal year 2022, the company projects revenue in the range of $755 million to $765 million, while the Street estimates revenue to be $755.51 million. Earnings are expected to be in the range of $1.45 – $1.50 per share, compared to the consensus estimate of $1.41 per share. (The guidance does not include any potential impact from the acquisitions of Further or the Fifth Third Bank HSA portfolio.)

Following the results, BTIG analyst David Larsen maintained a Hold rating on the stock and said, “The broader healthcare market is trending in such a way that supports the business model of HealthEquity… While we generally like the business model of HQY, the issue in our view is uncertainty around the re-opening of the economy and low-interest rates and a fairly high valuation relative to other mature health-tech stocks in the sector.”

The Wall Street community is cautiously optimistic about the stock with a Moderate Buy consensus rating based on 6 Buys and 3 Holds. The HealthEquity average analyst price target of $87 implies 11.6% upside potential to current levels. Shares have gained around 17% over the past six months.

HQY scores a 9 of 10 from TipRanks’ Smart Score rating system, indicating that the stock has strong potential to outperform market expectations.

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