Hot Stock to watch: Healthcare Services Group, Inc. (NASDAQ: HCSG)

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Healthcare Services Group, Inc. (NASDAQ: HCSG) stock rose over 1.2% on 22nd July, 2020 (as of 11:03 am GMT-4; Source: Google finance) after the company posted better than expected results for the second quarter of FY 20. The company has reported second-quarter net income of $23.1 million as compared to $18.2 million last year. The company has generated cash flow from operations for the second quarter of $79.7 million, inclusive of the $20.7 million increase in accrued payroll, $15.4 million of which related to the deferral of payroll taxes under the CARES Act. Going forward, the company intends to continue to innovate in managing the business, coordinating with nursing departments to do the part in the infection prevention and control continuum and remaining flexible in responding to the client-partners’ evolving service-level, staffing and supply chain needs.

HCSG in the second quarter of FY 20 has reported the adjusted earnings per share of 31 cents, while reported the adjusted revenue growth of 35.9 percent to $452 million in the second quarter of FY 20. This included $17.2 million of COVID-19 supplemental billings, mainly due to employee pay premiums passed through to customers, which were offset by temporary declines in recurring billings due to census-driven cost reductions in staffing and purchasing. The company has delivered the housekeeping & laundry and dining & nutrition segment revenues of $227.6 million and $224.4 million, respectively, which represents the segment margins were 11.1% and 8.3%, respectively. The company has incurred direct cost of services of $387.5 million, or 85.7%, which is an improvement after the Company successfully assigned its additional managers to facilities at which they are budgeted. Overall, the Company’s near-term goal is to manage direct cost at or below 86.0%.

Moreover, for the second quarter, the company has reported selling, general and administrative of $41.5 million, or 9.2%; after adjusting for the $6.5 million increase in deferred compensation, actual SG&A was $35.0 million, or 7.7%. The Company is currently targeting SG&A of 7.5%.

Additionally, the company has declared a quarterly cash dividend of $0.20375 per common share, which will be payable on September 25, 2020 to shareholders of record at the close of business on August 21, 2020.

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