Amedisys Q2 Beats Earnings, Misses Sales - Analyst Blog
02 August 2013 - 5:00AM
Zacks
Home healthcare provider
Amedisys Inc. (AMED) recorded adjusted (after
adding back for exit activity costs, gain on sale of care centers
and legal fees) earnings per share of 17 cents in the second
quarter of 2013, a massive downfall from 29 cents in the year-ago
quarter. Apart from the declining top line, margin contraction and
higher share count led to the earnings downfall. Per management,
the sequestration cut and volume decline adversely affected bottom
line by 9 cents. However, the result sailed past the Zacks
Consensus Estimate of 10 cents.
On a reported basis, Amedisys posted net income of $1.8 million or
6 cents per share in the second quarter, a considerable slide from
net income of $7.9 million or earnings of 26 cents in the
prior-year quarter.
Quarter in Detail
Amedisys primarily derives revenues from its home health and
hospice agencies. Second-quarter net service revenue came in at
$313.1 million, down 13.7% year over year. The adverse impact of
sequestration hurt revenues by about $5 million while the remainder
of the downfall was on account of significantly low volumes in its
segments. Revenues also trailed the Zacks Consensus Estimate of
$326 million.
For the company’s Home Health division, net service revenue was
$248.6 million (down 14.5% year over year) with Medicare revenues
of $202.9 million and non-Medicare revenues of $45.7 million in the
quarter. The decline was due to lower recertification, sustained
volume pressure and the impact of sequestration.
For the hospice division, net service revenue was $64.5 million
(down 11% year over year) including Medicare revenues of $60.8
million and non-Medicare revenues of $3.7 million in the quarter.
Lower admissions in the quarter and the sequestration cut led to
the decrease in segment revenues.
The company reported a 40 basis points (bps) contraction in gross
margin to 43.8% in the quarter. Expenses on salaries and benefits
declined 10.1% to $74.6 million, while other expenses decreased
9.9% to $41.1 million. Amedisys posted operating margin contraction
of 220 bps to 4.9% in the quarter.
Amedisys exited the quarter with cash and cash equivalents of $30.1
million compared with $14.5 million at the end of 2012. The
company’s long-term obligations (including current portion) were
$74.8 million compared with $1,027.1 million at the end of 2012.
Net cash provided by operating activities in the quarter was $33.6
million, up 54.5% year over year.
Outlook
Following another weak quarter, Amedisys tweaked its sales guidance
for 2013. Net service revenue is envisaged in the range of
$1.24-$1.28 billion compared with $1.28-$1.32 billion earlier. The
Zacks Consensus Estimate of $1.31 lies outside the revised
guidance.
The company continues to envisage earnings per share in the range
of 45 to 55 cents. The Zacks Consensus Estimates of 51 cents for
2013 is within the outlook band.
Our Take
Amedisys posted another weak quarter with sustained volume
pressure. Although the company’s earnings surpassed the Zacks
Consensus Estimate, it missed the Zacks Consensus Estimate for top
line for the fourth consecutive quarter. We believe that poor
segment performance, sluggish growth trend and the adverse impact
from sequestration led to the dismal second-quarter results. The
revised sales guidance for 2013, which lies below our projections,
also failed to inspire confidence.
We believe that the highly uncertain home nursing reimbursement
environment, coupled with significant reduction in Medicare
reimbursement in the recent past has affected Amedisys’ performance
over the past few quarters. We expect the healthcare reimbursement
pressure to persist even in 2013, thereby weakening the company’s
performance further.
Accordingly, we prefer to avoid Amedisys. The stock carries a Zacks
Rank #4 (Sell). On the other hand, medical sector stocks worth
considering are Affymetrix Inc. (AFFX),
Thoratec Corp. (THOR) and Align Technology
Inc. (ALGN). These stocks carry favorable Zacks Rank #1
(Strong Buy).
AFFYMETRIX INC (AFFX): Free Stock Analysis Report
ALIGN TECH INC (ALGN): Free Stock Analysis Report
AMEDISYS INC (AMED): Free Stock Analysis Report
THORATEC CORP (THOR): Free Stock Analysis Report
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