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Summary

  • LHC Group reported net service revenue of $188.9 million for the second quarter of 2014, compared to $166.3 million for the year-ago period, an increase of 13.6%.
  • Diluted EPS of $0.35 increased slightly from $0.34 for the year-ago period.
  • In my original analysis I mentioned that the company's long-term growth rate for the next five years would be around 13.67%.
  • The company’s second quarter revenue growth figure was exactly in line with my expectation, which confirms my view that the company is undergoing a secular bull phase.

LHC Group (NASDAQ:LHCG) recently announced its financial results for the second quarter ended June 30, 2014. Its net service revenue increased 13.6% year-over-year. In the quarter, the company registered net service revenue of $188.9 million, compared to $166.3 million for the same period in 2013. Net income came in at $6.1 million, compared to $5.8 million for the same period in 2013, and diluted EPS of $0.35 increased slightly from $0.34 for the year-ago period.

The company revised its full-year 2014 revenue and earnings guidance upwards. It revised its net service revenue guidance from the earlier range of $700 million to $720 million, to a range of $720 million to $730 million. The company also raised the lower end of its range for fully diluted EPS from $1.15 to $1.35 to a range of $1.25 to $1.35. As I said in my previous article, LHC Group's business model emphasizes on inorganic growth. Keith G. Myers, LHC Group's chairman and CEO, said, "Over the last 18 months, we have executed 10 transactions, including the recently announced definitive asset purchase agreement with Life Care Home Health, Inc. that is anticipated to close on September 1. These transactions, with a total purchase price of $101.5 million in cash, consisted of 81 locations in 21 states and represented $151.1 million in aggregate trailing twelve month revenues at the time of acquisition."

In my original article, I presented a bull thesis for LHC Group, based on the bullish outlook for the home healthcare industry and the company's acquisition-based compelling growth story. I believe that the bull thesis is still relevant, since everyday more than 10,000 baby boomers are turning 65 in the US, representing huge growth opportunities for the industry as well as for LHC Group. Long-term investors are advised to buy the stock around the current price of $25.

Source: Update: LHC Group Earnings