Buzz Stock of the Day – Healthcare Services Group (HCSG)

Healthcare facilities management companies were up today, led by our Buzz Stock of the Day — Healthcare Services Group, Inc. (Nasdaq: HCSG).

The Bensalem, Pa.-based company, which provides maintenance, food services and housekeeping to hospitals, retirement homes and rehabilitation centers reported first quarter profit of $7.7 million, or $0.18 per-share, a 13 percent increase over the same period last year.

Analysts estimated EPS of $0.17 per share for the quarter.

Revenue for the quarter increased 9 percent to $160.45 million, from $147.2 million a year earlier. The company also declared a first quarter cash dividend of $0.18 per common share, payable on May 15, 2009 to shareholders on record at the close of business on April 24, 2009. This marks a 6 percent increase over the dividend declared for the 2009 first quarter and a 29 percent increase over the 2008 same period payment. It is the 24th consecutive regular quarterly cash dividend payment, as well as the 23rd consecutive increase since the company initiated a regular quarterly cash dividend payments in 2003.

HCSG has quarterly revenue growth (yoy) of 5.2 percent, and has generated EBITDA of $44.7 million, on revenue (ttm) of $602.7 million. The company has an operating margin of nearly 7 percent, and has plenty of cash on hand. We like HCSG because it generates healthy operating cash flow and levered free cash flow, and has consistently raised its quarterly dividend.
The company also doesn’t take any reimbursement revenue, and all of its fees are paid in cash by customers. That protects Healthcare Services Group, Inc. from cuts or other changes in reimbursement rates, and despite the economic downturn, nursing homes need the company’s services, and are unlikely to cut them due to budget constraints.

The company also just announced an asset purchase agreement with Contract Environmental Services, Inc., a provider of professional housekeeping, laundry and food services to long-term care and related facilities. The transaction is expected to close around May 1st, and add more than $40 million to HCSG’s annual revenue, “as well as being accretive to future earnings per share,” according to the company’s first quarter earnings release.

As of December 31, 2008, Healthcare Services Group, Inc. provided services to approximately 2,100 facilities in 47 states.

Tags: buzz stocks, healthcare

This entry was posted on Wednesday, April 15th, 2009 at 3:51 pm by admin and is filed under Health Care Stocks. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.