Hot Bullish stock to watch: TriNet Group Inc (NYSE: TNET)

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TriNet Group Inc (NYSE: TNET) stock surged over 14.5% on July 28th, 2020 (as of 9:45 am GMT-4 ; Source: Google finance) post outstanding second quarter of 2020 performance. GAAP earnings per share surged 192% yoy to $1.87 per share, while the adjusted net income per share surged 190% to $2.03 per share, as the firm controlled operating expenses during the quarter. Moreover, for fiscal year of 2020, they raised their GAAP revenue guidance on the back of better than expected WSE count and higher health participation rate experienced in Q2. The firm is also raising the top-end of adjusted EBITDA margin range.

Even though overall GAAP total revenues rose 1% yoy to $948 million during the second quarter, Net service revenues delivered an outstanding growth of 45% yoy to $335 million. Professional service revenues fell 1% yoy to $121 million. Insurance service revenues rose 2% yoy to $827 million while insurance service revenues outperformed driven by better than expected retention and a health plan participation rate exceeding 70%. This is the highest recorded health participation rate driven by a huge mix shift in the TriNet customer base. The firm’s Net insurance service revenues surged 106% yoy to $214 million driven by net insurance service revenues on the back of lower insurance costs. The drivers behind the coining insurance costs were one-time in nature and driven by lower health utilization as a result of the decrease in medical services partially offset by COVID cases. Adjusted EBITDA surged 134% on a yoy basis to $199 million, from $85 million driven by cautious expenses management.

The firm forecasted a net insurance margin range of 19% to 23%, and exceeded the expectations delivering 26% as cost savings but forecasts a reversal of this in the second half. The firm’s revenue started to accrue for the client recovery credit program. The firm spent $60 million to buy 1.4 million shares of stock in the second quarter, and intends to continue to repurchase stock in the second half at a similar pace with most of the EPS accretion benefit from second half repurchases to be realized in 2021.

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