Healthcare (HCSG) Shows Strong Revenue Returns But Low Investment Returns

Healthcare Services Group, Inc.

reported a second quarter EPS of $0.20, a cent lower than the Morgan Keegan Equity Research’s $0.21 estimate. Attributing the numbers to strong contract signings and continued new business generation, the company reported a revenue of $193 million. This represented the company’s largest sequential internal revenue increase, $9.2million, and exceeded the equity firm’s $188.6 million estimate. The company incurred $750,000 losses on its deferred compensation plans, lowering the SG&A to 7.1% and investment income to 6.6% of revenue. The firm gave an Outperform rating but lowered their 2010 EPS estimate from $0.82 to $0.80 citing SG&A expenses and low investment returns.