HealthEquity's Long-Term Growth Intact Despite Short-Term Margin Pressures, Analyst Says

On Tuesday, HealthEquity, Inc. HQY reported fourth-quarter adjusted EPS of 69 cents, up from 63 cents a year ago, missing the consensus of 72 cents.

Revenue increased 19% year over year to $311.8 million, beating the consensus of $306.05 million.

The health savings account custodian reported adjusted EBITDA of $107.8 million, an increase of 9%.

Health savings accounts (HSAs) as of January 31, 2025, were 9.9 million, an increase of 14% year over year, including 753,000 HSAs with investments, an increase of 23% year over year. As of January 31, 2025, total accounts were 17.0 million, including 7.1 million other consumer-directed benefits (CDBs).

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Guidance: HealthEquity expects fiscal year 2026 revenue of $1.28 billion to $1.305 billion, compared to estimates of $1.301 billion.

The company anticipates adjusted EPS of $3.57 to $3.74, compared to the consensus of $3.71. Management expects Adjusted EBITDA of $525 million to $545 million.

Barrington Research maintains HealthEquity with an Outperform and a $112 price target.

Analyst Alexander Paris writes the earnings were impacted by excess costs associated with cyber-fraud prevention and reimbursements.

“While the magnitude of the excess costs associated with cybersecurity fraud and prevention was more than expected, we are “looking over the valley” to better margins and earnings growth in 2H/26 and beyond,” analyst Paris writes.

With HQY’s strong HSA business and higher cash yields expected in the coming years, the analyst writes that the company’s overall financial and operational performance will keep improving once temporary extra costs subside.

Price Action: HQY stock is down 18.9% at $82.46 at the last check Wednesday.

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