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Why Healthways, Inc. Shares Shot 18.3% Higher Today

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What: Shares in Healthways, Inc (NASDAQ: HWAY) rallied 18.3% today, after the company reported second-quarter financial results and updated investors on its restructuring plans.

So what: The healthcare analytic company said second-quarter sales from continuing operations were $125 million, up 10.2% from last year, and that EPS was $0.32, which was $0.31 ahead of Wall Street's average projection.

The company completed the sale of its total population health services business to Sharecare on July 31, and that transaction resulted in a $195.5 million loss from discontinued operations, primarily because of an estimate of impairment of assets held for sale and operating losses associated with that business.

Now what: The official transaction costs associated with the sale to Sharecare will show up in the company's third-quarter financials.

Management projects that restructuring savings will be between $14 million and $16 million beginning next year, and up to half of those savings could end up being invested in growth initiatives. Guidance includes 20%-plus EBITDA margin for its remaining network solutions business, which includes Silver Sneakers Fitness, Prime Fitness, and Physical Medicine, and an annualized sales rate exiting 2016 in excess of $500 million, with high-single-digit organic growth.

Solid operating results for its remaining operations and management's conviction that there's "good visibility to consistent quarterly performance for the rest of this year" suggest Healthways could be in position to start rewarding investors again. However, this is still a transitioning company, and while its efforts to get on firmer footing should be applauded, other opportunities might be best until the restructuring is fully digested.

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Todd Campbell has no position in any stocks mentioned. Todd owns E.B. Capital Markets, LLC. E.B. Capital's clients may have positions in the companies mentioned. Like this article? Follow him on Twitter where he goes by the handle

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