HealthEquity surges on earnings beat, raises fiscal 2027 guidance
Health benefits administrator expands EBITDA margin 500 basis points to 40% and adds 1 million new HSAs
HealthEquity shares climbed in extended trading Tuesday after the health benefits administrator reported fourth-quarter earnings and revenue that exceeded analyst expectations, accompanied by a significant increase in fiscal 2027 guidance.
The company reported adjusted earnings per share of $0.95 for the quarter ended January 31, topping the consensus estimate of $0.91 by 4.1%. Revenue reached $334.6 million, beating projections of $321 million by 4.2%. The performance marks a turning point for the Utah-based firm, which has seen its stock decline 32% from its 52-week high of $116.65 amid broader healthcare sector volatility.
HealthEquity raised its fiscal 2027 outlook aggressively, projecting revenue of $1.41 billion and non-GAAP earnings per share of $4.56 to $4.65, representing 15% year-over-year growth. The company also forecast adjusted EBITDA of $618 million to $628 million, with margins expanding to 40%—a 500-basis-point improvement that executives attribute to operational efficiency gains and scale benefits from its health savings account platform.
The strong performance was underpinned by continued expansion in health savings accounts, with HealthEquity adding 1 million new HSAs for the second consecutive year. Total assets under administration now stand at $36.5 billion, up 14% from the prior year, as consumers increasingly turn to tax-advantaged accounts to manage healthcare costs in a high-inflation environment.
For the full fiscal year, revenue increased 9% to $1.31 billion, while net income surged 123% to $215.2 million, according to the company's earnings release. The company has now delivered record revenue and earnings for three consecutive fiscal years.
Analysts remain broadly bullish on HealthEquity despite recent stock underperformance. Of the 16 analysts covering the stock, 14 rate it a buy or strong buy, with a consensus price target of $114.44—more than 44% above current levels. The forward price-to-earnings ratio of 17.39 compares favorably to the trailing multiple of 35.69, suggesting the market has yet to fully price in the company's growth trajectory.
HealthEquity's business model positions it to benefit from secular tailwinds in the U.S. healthcare system. As employers shift more costs to employees through high-deductible health plans, adoption of HSAs has accelerated, with the company capturing market share through technology integrations with benefits administration platforms. The firm's ability to cross-sell investment services and retirement planning tools to its HSA customer base provides additional revenue streams that have driven margin expansion in recent quarters.
However, investors will be watching closely for signs of competitive pressure from larger benefits administrators like ADP and payroll processors that have begun offering integrated HSA solutions. HealthEquity's 40% adjusted EBITDA margin—well above industry averages—could face pressure if competition intensifies in the coming years.
The company's guidance for 15% earnings growth in fiscal 2027 suggests confidence in its ability to maintain market share and expand margins despite increasing competition. Management emphasized during the earnings call that investments in artificial intelligence and automation would further improve operational efficiency, supporting continued margin expansion.
Tuesday's rally provides some relief for shareholders who have endured a volatile year for the stock. HealthEquity currently trades below both its 50-day moving average of $82.38 and its 200-day moving average of $92.92, meaning it would need to gain more than 16% just to reclaim its intermediate-term trend. The strong earnings beat and raised guidance could mark the beginning of a broader recovery if the company can execute on its ambitious growth targets.
Investors will focus on several upcoming catalysts, including implementation details of the company's technology investments and any announcements regarding new enterprise partnerships. With healthcare costs continuing to rise and employers seeking ways to manage benefits expenses, HealthEquity's value proposition remains compelling—assuming it can fend off competitive challenges and maintain its industry-leading margins.