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Why Did Healthcare Services Shares Gain 20%?
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Why Did Healthcare Services Shares Gain 20%?

Healthcare Services Group (NASDAQ: HCSG) shares gained almost 20% on April 20, after the company delivered a blowout first-quarter results, impressively surpassing earnings expectations. HCSG also raised its quarterly cash dividend for the 75th consecutive time.

Based in the U.S., Healthcare Services Group is an experienced leader in managing housekeeping, laundry, dining, and nutritional services within the healthcare industry.

Q1 Numbers

Notably, adjusted earnings of $0.15 per share more than doubled analysts’ expectations of $0.06 per share. However, it was half of the reported earnings of $0.33 per share for the prior-year period.

Furthermore, revenues jumped 4.7% year-over-year to $426.8 million and exceeded consensus estimates of $424.77 million.

On top of that, the company’s Board increased the quarterly cash dividend for the 75th consecutive time to $0.2125 per common share. The dividend is payable on June 24 to shareholders on record as of May 20.

CEO Comments

Looking forward, Healthcare Services Group CEO, Ted Wahl, commented, “We remain confident in our ability to execute on our near-term objectives and the long-term growth outlook for the Company remains as strong as ever, given the increasing resonance of our value proposition and the attractive demographics.”

Wall Street’s Take

Following the quarterly beat, RBC Capital analyst Sean Dodge increased the price target on Healthcare Services Group to $20 from $17 and reiterated a Hold rating.

Consensus among analysts is a Hold based on four Holds and one Sell. The average Healthcare Services stock Forecast of $15.70 implies 21.2% downside potential from the current levels.

Investors Weigh In

TipRanks’ Stock Investors tool shows that investors currently have a Very Positive stance on Healthcare Services Group, with a whopping 18% of investors increasing their exposure to HCSG stock over the past 30 days.

Conclusion

Investors cheered the smashing quarterly beat on the back of efficient labor management, and food inflation pass-through increases. Meanwhile, the rest of the industry continues to struggle with continually rising inflation, supply chain challenges, and labor shortages.

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