Strong Earnings Season Boost Home Health Stocks

The market values of some of the biggest home health companies ticked in April, thanks in part to positive earnings results at the start of the year.

The Home Health Index, managed by Stoneridge Partners, has long tracked the market value of three of the largest home health companies. Previously, three companies comprised the index: Almost Family, [NASDAQ: AFAM] LHC Group (NASDAQ: LHC)  and Amedisys (NASDAQ: AMED).

Following the mega-merger between LHC Group and Almost Family at the beginning of April, the HHI now consists of two companies: LHC Group and Amedisys. Almost Family is no longer traded as an individual stock.

Lafayette, Louisiana-based LHC Group stock jumped 20.9% in April. Year-to-date, stock is up 21.5%. Following the completion of its merger, LHC Group is now the second-largest home health care company in the nation, with approximately 775 locations and an annual revenue of $2 billion. Even after its mega-merer,  the company shows no signs of slowing down on its mergers and acquisitions activity.

During the company’s recent first quarter earnings call, CEO Keith Meyers stated his organization has a pipeline of 24 ongoing discussions with health systems and hospitals. These discussions revolve around forming home health joint ventures.

As the only other company in the HHI, Baton Rouge, Louisiana-based Amedisys also saw stock prices rebound by 9.3%. The company revealed during its first quarter earnings call that Q1 2018 saw its margins increase to their highest levels since 2015. Amedisys stock, year-to-date, is up 25.2%.

As April ended, the HHI was up 18.4% as a result of removing Almost Family and recalculating the index. The uptick is a stark difference from March, when the HHI declined 2.7%. Compared to this point in 2017, the HHI is up 24.4%. And it wasn’t just home health stocks that bounced back in April — the S&P 500 slightly rose 0.9%.

Both company’s strong first quarter earnings were likely boosted by a proposal from the Centers for Medicare & Medicaid Services. At the start of April, CMS announced that non-skilled in-home care supports will be allowed as a supplemental benefit for Medicare Advantage plans, starting in 2019. Large home health care providers view Medicare Advantage as a growing opportunity.

“On top of the completion of a major transaction that changed the face of the home health care industry, the news from CMS definitely helped companies overcome a turbulent March,” said Stoneridge Partners President Rich Tinsley. “And with strong first quarter earnings, the coming months may be even better for home health companies.”

Also of note, Frisco, Texas-based Addus HomeCare (NASDAQ: ADUS) also posted positive gains. At the end of April, Addus stock rose 7.19%, and year-to-date, it’s up nearly 50%. While Addus is a major personal care services provider, it’s not part of the HHI, as little of its revenue is from Medicare.

Erik Prado on EmailErik Prado on Linkedin
Erik Prado
Erik currently writes and helps with marketing. Outside of work, he enjoys the simple things in life, such as Game of Thrones, following new tech trends, running and sports (I-L-L).

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