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Buzz Stock of the Day – Providence Service Corp. (PRSC)

Monday, April 20th, 2009

The Providence Service Corp. (Nasdaq: PRSC) stated today that it expects first quarter earnings per share of at least $0.35, a dime higher than the First Call consensus of $0.25. The social services management company stated it expects revenue or between $180 million and $185 million, higher than the $179.7 million analyst consensus.

Earlier this month, the Tuscon-based company announced that its Logisticare subsidiary won a $300 million contract from the New Jersey Department of Human Services to provide non-emergency transportation services for the fee-for-service in selected counties in New Jersey. The contract is expected to take effect on July 1, 2009, and has an initial term of three years with two, one-year renewal options that run through 2014.

Shortly before the contract was announced, SunTrust Robinson Humphrey analyst, Mark Hughes upgraded his rating on the stock to ‘buy,’ from ‘neutral. Hughes has a $12.00 price target on PRSC.

We like PRSC because the company generates cash from operations, has a small float and has year-over-year revenue growth of about 80 percent. The Providence Service Corp.’s 2008 revenue increased 143 percent to $691.7 million from $285.2 million a year earlier. Excluding a $169.9 million and an expense related to accelerated vesting, the company generated EBITDA of $39.1 million from $30.7 million a year earlier.

Shares of PRSC are up almost 500% since the onset of 2009.

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Buzz Stock of the Day – China Sky One Medical (CSKI)

Thursday, April 16th, 2009

Business is booming for our buzz stock of the day, China Sky One Medical, Inc. (Nasdaq: CSKI).

The company, which manufactures over-the-counter drugs in China, reported record results for the fourth quarter and 12 months ended December 13, 2008.

Operating income for the year increased 91.6 percent to $35.7 million, and revenues increased 86.2 percent to $91.8 million.

The company started trading on the Nasdaq Global Market on September 16, 2008, and recently completed several key acquisitions, and recently received SFDA final approval for 19 drugs.

China Sky One expects full-year 2009 revenue to increase 40 percent to between $128 million and $130 million, and net profit margin to increase to $38 million to $39 million.

For the trailing 12 month period, China Sky One earned about $5.60 a share on revenue of $78.5 million. The company has about $51 million of cash, and generated $21 million of levered free cash flow.

We like CSKI because the company has continued to demonstrate growth in tough economic times, made some key acquisitions that could be accretive in the very near future, and has hefty 40.3 percent operating margins. The company also has a low P/E ration (8.58) compared to the industry average of 9.39.

“We are confident about the prospects for our business in 2009 and will continue to focus on increasing market share by both strengthening and further refining our successful sales and distribution network, building and enhancing our brand image, and making strategic acquisitions that continue to support our growth,” said Yan-Qing Liu, Chairman and CEO of China Sky One Medical, Inc.

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

Wednesday, April 15th, 2009


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.

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