Morgan Keegan Gives Color On Healthcare Services Group Following Earnings Results

Healthcare Services Group HCSG reported lower-than-expected first quarter EPS due to margin pressures arising primarily from nonrecurring items. Morgan Keegan believes that the company's very strong revenue generation is a better indicator of HCSG's future growth prospects. Morgan Keegan is raising its revenue estimates and lowering margin estimates going forward, resulting in slightly lower EPS estimates but maintain a $19.25 PT and Outperform. The strong revenue growth was offset by two items. First, as happens when HCSG has unusually strong new business generation, margins were adversely affected by startup costs. Second, the company had reserved against a 2008 bankruptcy but in March the operator was replaced at the facility and HCSG lost its claims and recovery costs. HCSG closed Tuesday at $18.02