Why Healthways, Inc. Stock Tumbled Today

By Markets Fool.com


Image source: Healthways Inc.

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What happened

Healthways, Inc.(NASDAQ: HWAY), the health and well-being solutionscompany that provides many products specifically for elderly Americans, got crushed Wednesday after Q3 earnings came in lower than analyst expectations. As of the end of the trading day, the stock was down nearly 15%.

So what

Healthways reported adjusted earnings of $0.30 per share in the third quarter, barely more than half of what analysts were expecting. While revenue was up 10% year over year, it was also lower than most analysts expected.Healthways is in somewhat of a restructuring phase after selling off parts of its business in the past year, and costs associated with those divestures seem to be part of the reason for the lower-than-expected results.

Now what

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Healthways stock has been on a winning streak all year, posting double-digit gains over the past year before the Wednesday sell-off. The stock is still up 65% over the past year, even after today's decline.

Of course, because Healthways depends in large part on Medicare benefits, it could see a rocky future ahead in the next year following the presidential election. Furthermore, be sure to watch that earnings results, especially as related to costs, stabilize once the effects of recent divestitures settle. Still, the company seems to be operating well regardless of the divestitures, and investors should look closer at the business before getting overly concerned by today's stock drop.

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Seth McNew has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.