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Amedisys Down to Hold

Zacks Equity Research

On Mar 15, 2014, Zacks Investment Research downgraded Amedisys Inc. (AMED) to a Zacks Rank #3 (Hold) from a Zacks Rank #2 (Buy).

Why the Downgrade?

On Mar 12, Amedisys reported dismal operating results for fourth-quarter 2013. The company recorded adjusted loss from continuing operations per share of 5 cents, a massive downfall from the adjusted income from continuing operations of 25 cents earned in the year-ago quarter. Reported loss was also wider than the Zacks Consensus Estimate of loss of 3 cents a share.

Although revenues of $303.5 million in the quarter fared better than the Zacks Consensus Estimate of $295 million, the results were down 13.7% year over year.

Amedisys also failed to meet its guidance for yet another quarter. Per management, three factors led to the earnings downfall: higher cost per visit in home health, higher-than-expected employee healthcare cost and an accrual of $450,000 related to one of the company’s care centers.

We believe poor segment performance, sluggish growth trends and the adverse impact from sequestration led to the dismal fourth-quarter results. Moreover, the fact that no guidance was provided for the upcoming fiscal failed to inspire confidence.

Subsequently, the company has seen a negative trend in earnings estimate revision in the past 7 days. For the first quarter of 2014, three estimates moved down in the past 30 days, with no upward revision while for the full year, four estimates moved down with a single upward revision alone.

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 2014, thereby weakening the company’s performance further.

Other Stocks to Consider

Some better-ranked stocks in the broader medical industry include Align Technology Inc. (ALGN), CR Bard Inc. (BCR) and Becton, Dickinson and Co. (BDX). All the three stocks hold a Zacks Rank #2.

Read the Full Research Report on AMED
Read the Full Research Report on BCR
Read the Full Research Report on ALGN
Read the Full Research Report on BDX

Zacks Investment Research