LHC Group, Inc. LHCG is well positioned for growth, supported by strategic deals and a wide range of services. However, the fierce competition remains worrying.
The stock fell 12.1% compared to the industry’s 38.8% decline in a year. The S&P 500 index rose 34.4% over the same period.
The LHC Group – with a market capitalization of $ 5.72 billion – is a renowned provider of post-acute healthcare services. The result is expected to improve by 14.1% over the next five years. The company has a surprising earnings surprise averaging 10.1% over the past four quarters.
Let’s take a closer look at the factors that make up the company’s Zacks Rank # 3 (Hold).
Factor that harms the stock
The LHC Group operates in a highly competitive industry characterized by a fragmented home healthcare market. Some of its competitors are MedTech bad guys like Amedisys, Inc. AMED, who have greater resources and better access to capital. Local and regional providers of home health services are also facing tough competition. This includes providers of facilities and hospitals, care associations and care registers.
We are optimistic about the LHC Group’s robust growth opportunities through acquisitions and partnerships. In July 2021, the company signed agreements to acquire three home health, hospice and palliative care providers in three states. It also completed previously announced buyouts and has locations in the states of Idaho, Oregon, Arizona, and Texas. The announcement of these acquisitions and the completion of previous acquisitions is expected to provide a significant boost to the company’s hospice and home health businesses.
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In the same month, the company entered into a strategic partnership with SCP Health to jointly develop and deliver advanced clinical care services at home.
Since the beginning of the year, the company completed or announced the acquisition of 26 hospice locations, three home health locations, and one Home and Community Based Services (HCBS) location in 11 states for annual revenue of $ 161.7 million.
The wide range of services offered by the LHC Group through its various business areas, which have also contributed significantly to the increase in sales, gives cause for optimism. In the home health services arena, nurses, home health workers, and therapists work closely with patients and their families to design and implement customized treatment plans in accordance with a physician-prescribed care plan.
In the second quarter of 2021, home health care revenue was $ 396.5 million, up 16.7% year over year, while home nursing admissions were up 16.4%.
The Hospices segment offers a wide range of services, including pain and symptom management, emotional and spiritual support, inpatient and short-term care, housewife services and counseling. In the second quarter, hospice service income increased 4.5%, while organic growth in hospice admissions increased 11%.
The LHC Group is seeing an upward trend in its estimates revision for 2021. Over the past 60 days, the Zacks Consensus Estimate on its earnings is up 1.1% to $ 6.43.
The Zacks Consensus estimate for the company’s third quarter 2021 revenue is $ 580.1 million, up 9.3% year over year.
Shares to Consider
Some better-rated stocks from the broader medical field include Henry Schein, Inc. HSIC and Envista Holdings Corporation NVST, both currently have a Zacks rank of # 2 (Buy). You can see the full list of current Zacks # 1 Rank (Strong Buy) stocks here.
Henry Schein’s long-term earnings growth rate is estimated at 13.9%.
Envista Holdings’ long-term earnings growth rate is estimated at 27.4%.
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The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.