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Amedisys (AMED) New Buyouts Aid Growth, Margin Pressure Stays

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Amedisys AMED is currently exploring new opportunities in Home Health and Hospice segments. The company’s favorable demographic trend and strategic acquisitions are also encouraging. However, reimbursement headwinds and competitive challenges remain concerns. Amedisys currently carries a Zacks Rank #3 (Hold).

Amedisys ended the first quarter of 2022 with better-than-expected earnings. The top line registered year-over-year growth on robust performances across the Home Health and Hospice segments. For Home Health, first-quarter total admissions improved 2% year over year. In terms of clinical mix, the company achieved 48% LPN (Licensed Practical Nurse) utilization and 53% PTA (Physical Therapist Assistant) utilization in the reported quarter. Within the Hospice business, the company made significant progress in hiring hospice BD full-time equivalent (FTE) staff, ending the quarter with 514 hospice BD FTEs.

The Contessa Health acquisition seems to be strategically aligned with Amedisys’ business. The company’s newly formed high-acuity care segment, Contessa, experienced continued positive momentum in the first quarter, offering home-based recovery solutions to patients needing acute level care. Further, improved revenues from Medicare and Non-Medicare buoy optimism. The company has reaffirmed its outlook for 2022, which is also encouraging.

Amedisys, Inc. Price

Amedisys, Inc. Price
Amedisys, Inc. Price

Amedisys, Inc. price | Amedisys, Inc. Quote

Amedisys is currently focusing on improving clinical quality. In this regard, we note that Amedisys’ Quality of Patient Care star average score in the home health industry was 4.33 in 2021. The company had 95% of care centers at four stars or above and 37 care centers at 5 stars. Meanwhile, the company’s Patient Satisfaction star average was 3.60, which outperformed the industry average by 3%. At present, Amedisys is implementing targeted action plans to consistently improve the quality of care for patients and advance its culture of quality, so that it can realize its goal of having all care centers attain a 4.0 Quality of Patient Care star rating.

On the flip side, Amedisys’ Personal Care revenues registered a year-over-year decline of 17.6% in the reported quarter. Within the Home Health segment, the rebound in elective procedures was impacted by the emergence of the Omicron variant. The electives declined to 6.5% of total episodes compared with 8.5% in the pre-pandemic times. Further, the company saw an increase in Hospice costs per day to $8.58 in the reported quarter. This increase is attributable to fixed costs associated with salary employees on a lower census, contract utilization, planned wage increases, wage inflation, sign-on bonuses and higher visits performed by employees as the prior year was impacted by excess restrictions due to COVID-19.

Further, during the first quarter, Amedisys’ expenses on salaries and benefits rose 6.6%. Other expenses increased 9.2%. The escalating costs and expenses are building pressure on the company’s bottom line. The gross margin in the reported quarter contracted 57 basis points (bps) to 44.1%. Adjusted operating margin fell 234 bps to 10.3% from the prior-year level.

In the past three months, Amedisys has underperformed the industry it belongs to. As per the last trading price, the stock has lost 18.5% compared with an 8.9% decline of the industry.

Key Picks

Some better-ranked stocks in the broader medical space that have announced quarterly results are Omnicell, Inc. OMCL, UnitedHealth Group Incorporated UNH and Alkermes plc ALKS.

Omnicell, carrying a Zacks Rank #2 (Buy), reported first-quarter 2022 adjusted EPS of 83 cents, which beat the Zacks Consensus Estimate by 16.9%. Revenues of $318.8 million outpaced the consensus mark by 0.7%. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Omnicell has an estimated long-term growth rate of 16%. OMCL's earnings surpassed estimates in three of the trailing four quarters and missed once, the average surprise being 13.4%.

UnitedHealth, carrying a Zacks Rank #2, reported first-quarter 2022 adjusted EPS of $5.49, which beat the Zacks Consensus Estimate by 1.7%. Revenues of $80.1 billion outpaced the consensus mark by 1.9%.

UnitedHealth has an estimated long-term growth rate of 14.8%. UNH's earnings surpassed estimates in each of the trailing four quarters, the average surprise being 3.7%.

Alkermes reported first-quarter 2022 adjusted EPS of 12 cents, which beat the Zacks Consensus Estimate of a penny. First-quarter revenues of $278.6 million outpaced the Zacks Consensus Estimate by 6.2%. It currently sports a Zacks Rank #1.

Alkermes has an estimated long-term growth rate of 25.1%. ALKS' earnings surpassed estimates in each of the trailing four quarters, the average surprise being 350.5%.


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