Earnings wrap: HealthStream, Noranda

Health education venture misses EPS target but revenue outlook tops Street; Aluminum company's shares pop on smaller-than-expected loss

Health care education company HealthStream posted a fourth-quarter profit of almost $1.8 million, down 3 percent from the last three months of 2012, as operating costs grew more quickly than revenues. Per diluted share, earnings came in at 6 cents, 2 cents below what analysts had expected.

The quarter's top line at downtown-based HealthStream grew by a third to $37.1 million — helped in part by the signing up of a whopping 289,000 new subscribers during the quarter — driven by growth in the company's ICD-10 training products and patient surveys. But operating spending rose by 37 percent as CEO Bobby Frist and his team continued to invest in building out their product platform. Gross margins also fell, in part because some of the company's lower-margin services grew more quickly than more profitable products. Annualized revenues per subscriber rose almost 5 percent from the third quarter and 20 percent from a year ago. (See chart below.)

Looking ahead to this year, Frist said he expects HealthStream to grow its revenues between 22 percent and 26 percent to $161 million and $167 million, which is above the $160 million analysts had expected. Operating profits are forecast to grow between 11 percent and 15 percent. On a conference call with analysts and investors, Frist defended his strategy of adding technology and sales teams, which will focus particularly this year on SimVentures and long-term care in particular.

"We're not asking for a pass on them," he said of the investment priorities. "But we think good companies are built over a long period of time with steady investment in real opportunities [...] And there's no shortage of vision for the products we can build to generate high-margin revenues."

Shares of HealthStream (Ticker: HSTM) were down more than 3 percent to about $30.20 in early trading Wednesday. They've fallen about 9 percent over the past three months.

 
Noranda Aluminum Holding executives said the company lost $17.7 million in the fourth quarter, a reversal from Q4 2012 profits of $4.2 million. Per diluted share, the losses amounted to 26 cents, but that number includes 14 cents per share worth of special items. Excluding those, EPS was 7 cents better than analysts had expected.

Revenues of Franklin-based Noranda fell 6 percent to $313 million. Operating losses widened to $12.9 million from $3.2 million a year earlier, while segment profits slipped to $20.8 million from $30.9 million. President and CEO Kip Smith said Noranda delivered a "solid" performance in the quarter, which included the laying off of about 190 people in December as part of a larger cost-cutting program.

"We generated positive cash flow, and made meaningful progress on key productivity projects," Smith said. "We continue to believe in the industry's long-term fundamentals despite continuing low LME prices. [...] We have created a pathway for a step-change in our financial performance to support both sustainable operations and accretive investments in our integrated platform in the coming year."

Noranda shares (Ticker: NOR) popped 10 percent in early Wednesday trading to about $4. They have climbed more than 20 percent so far this year after sliding about 40 percent in 2013.