Seeking Alpha
Growth at reasonable price, deep value, healthcare, tech
Profile| Send Message|
( followers)  

Summary

  • Hanger’s net sales in the second quarter of 2014 increased 3% to $275.9 million from $267.8 million in the prior year period.
  • Adjusted diluted EPS came in at $0.40 in the second quarter, compared to $0.52 in the year-ago period, a 23% decrease.
  • In my original article I mentioned that Hanger operates in an extremely fragmented industry, and therefore might have to face fierce competition.
  • Continuing pressure on authorizations, collections and patient flow significantly impacted Hanger’s top and bottom line in the second quarter, which may continue to remain a headwind.

Hanger (NYSE:HGR) reported second quarter 2014 net sales of $275.9 million, an increase of $8.1 million from net sales of $267.8 million in the year-ago period. However, adjusted diluted EPS came in at $0.40 in the second quarter, compared to $0.52 in the year-ago period, a 23% decrease. Diluted EPS remained almost flat that came in at $0.35 for the quarter compared to $0.40 in the year-ago period.

The company revised its full-year adjusted diluted EPS guidance downwards to $1.60 - $1.70 from $2.01 - 2.11. Revenue guidance also revised downwards to $1.05 billion - 1.08 billion from $1.10 billion - 1.12 billion. Vinit Asar, president and CEO of Hanger, said, "We are clearly disappointed with our second quarter results and are revising our outlook for the year. The continuing pressure on authorizations, collections and patient flow has had a significant impact on our top and bottom line to date, and will continue to pressure our earnings growth at least through the remainder of this year."

In my original article I said that Hanger being a unique orthotic and prosthetic (O&P) player in the United States, which accounted for 19% of the estimated $4.3 billion spent each year in the country on O&P products and services, could be worth buying. When I recommended the stock, it was trading around $31, and subsequently rose to almost $41. I also warned investors that Hanger operates in an extremely fragmented industry, which needs to be consolidated. Until that happens, Hanger may have to face fiercely uncompetitive price, especially from small regional players. Clearly, the company is currently facing fierce competitive pressure, which may continue to exist and impact the company's bottom-line going ahead. Although the company has begun to implement a host of cost-cutting measures, it remains to be seen how effective they could be in boosting bottom-line growth. I'd recommend investors waiting on the sidelines until the cost-cutting measures begin to bear fruit before investing fresh money into the stock.

Source: Update: Hanger Earnings