SXC Health Solutions - Aggressive Growth

SXC Health Solutions Corp (SNX) is setting new highs on upward estimate revisions. This Zacks #1 Rank (Strong Buy) has recently announced a very well-received acquisition. In addition, the company has an impeccable earnings history.

Company Description

SXC Health Solutions provides pharmacy benefit management services and healthcare IT solutions to benefit companies. Customers include health plans, employers, governments, institutional and retail pharmacies.

Estimates Still Rising

Over the past month, analysts continue to raise their full-year projections for 2011. The Zacks Consensus Estimate for 2011 is up 4 cents, to $1.52, in the past month. While this is not a major move, any upward momentum without recent earnings news is fantastic.

Given the $0.95 earned in 2009 and the $1.08 consensus for 2010, the annual growth rates are expected to be 13% for last year and a solid 41% in 2011.

M&A Activity

SXC Health Solutions announced that it finalized a $100 million deal to acquire MedfusionRx, a specialty pharmacy provider. The purchase was made in cash and could fluctuate slightly depending on some adjustments.

Analysts liked the news though, with 4 upward revisions coming since the announcement. Additionally, a boutique brokerage firm initiated coverage on SXC Health Solutions with a Buy rating on Jan 7.

Great Earnings History

SXC Health Solutions has not missed an earnings estimate since mid 2007. The most recent quarterly report came on Nov 4 and showed EPS of 27 cents, topping the consensus by a penny.

A 28% increase in revenues led to the 44% increase in net income. In the same report, management announced a $720 million 3-year deal with a large east coast health plan.

The Chart

In the chart below you can see the reaction the market had to the $100 million acquisition. Since then shares had been trading sideways for the most part, but momentum is back (see the MACD cross over) and shares are hitting new highs.

Bill Wilton is the Aggressive Growth Stock Strategist for Zacks.com. He is also the Editor in charge of the market-beating Zacks Small Cap Trader service
 
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