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Amedisys (AMED) Tops Earnings and Revenue Estimates in Q4

Zacks Equity Research
The First Bancshares (FBMS) delivered earnings and revenue surprises of 2.94% and 5.60%, respectively, for the quarter ended June 2019. Do the numbers hold clues to what lies ahead for the stock?

Amedisys, Inc. AMED reported adjusted earnings per share (EPS) of 91 cents in the fourth quarter of 2018, up 62.5% from the year-ago 56 cents. The bottom line beat the Zacks Consensus Estimate of 85 cents by 7.1%.

Adjusted EPS in 2018 came in at $3.63, up 64.3% year over year. The figure also surpassed the Zacks Consensus Estimate of $3.58 by 1.4%.

Net service revenues grossed $434.4 million, up 9.1% year over year. Moreover, the top line beat the Zacks Consensus Estimate by 1.9%.

Revenues in 2018 came in at $1.66 billion, up 9.9% year over year. The figure was in line with the Zacks Consensus Estimate.

Quarter in Detail

Within the company's Home Health division, net service revenues totaled $304 million in the fourth quarter, reflecting a 7.8% improvement year over year. Medicare revenues of $211.5 million rose 3.2% year over year while non-Medicare revenues improved 20.3% to $92.5 million.

Within the Hospice division, net service revenues grossed $108.8 million (up 11.1% year over year), including Medicare revenues of $103.5 million (up 11.7%) and non-Medicare revenues of $5.3 million (up 1.9%).

Additionally, the company integrated two additional operating segments within its business, namely, Personal Care and Corporate. At Personal Care, net service revenues totaled $21.6 million, representing a 19.3% rise from the year-ago number. Meanwhile, the Corporate segment did not register any revenue in the fourth quarter.

Gross margin contracted 30 basis points (bps) to 39.6% in the quarter under review in spite of an 8.4% gain in gross profit. Expense on salaries and benefits rose 6.2% to $84.3 million. Other expenses rose 7.5% to $42.8 million. Adjusted operating income of $45 million in the reported quarter reflects a 13.6% rise from the year-ago tally. Adjusted operating margin expanded 50 bps to 10.4% from a year ago.

Amedisys exited 2018 with cash and cash equivalents of $20.2 million compared with $86.4 million at 2017-end. The company's long-term obligations (excluding current portion) were $5.8 million at the end of 2018 compared with $78.2 million at the end of 2017. Net cash provided by operating activities was $223.5 million in 2018, compared with $105.7 million in 2018.

Our Take

Amedisys ended 2018 on a promising note with earnings and revenues exceeding the Zacks Consensus Estimate. At the Home Health and Hospice divisions, the company witnessed encouraging growth in Medicare and non-Medicare revenues. Amedisys is currently exploring opportunities in these segments. In this regard, Amedisys recently inked an agreement to buy hospice care provider —RoseRock Healthcare. The transaction is expected to close by Apr 1.

We are also impressed by the company’s solid performance in the recently-launched Personal Care segment.  A favorable demographic trend and strategic acquisitions also bode well.

However, escalating operating expenses continue to raise concerns. Also, an intense competitive landscape and regulatory concerns pose challenges to the home health and hospice industry.

Zacks Rank & Other Key Picks

Amedisys currently carries a Zacks Rank #1 (Strong Buy).

Other top-ranked stocks that posted solid quarterly results are Varian Medical Systems VAR, AngioDynamics ANGO and CONMED Corporation CNMD. 

Varian reported fiscal first-quarter adjusted EPS of $1.06, in line with the Zacks Consensus Estimate. Revenues of $741 million outpaced the consensus mark of $717.9 million. The stock has a Zacks Rank #2 (Buy).

AngioDynamics’ fiscal second-quarter adjusted EPS of 22 cents exceeded the Zacks Consensus Estimate by a penny. Revenues totaled $91.5 million, which surpassed the consensus estimate by 2.9%. The stock has a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

CONMED delivered fourth-quarter adjusted EPS of 73 cents, in line with the Zacks Consensus Estimate. Revenues of $242.4 million beat the Zacks Consensus Estimate of $229.2 million. The stock carries a Zacks Rank of 2.

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