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Here's Why You Should Add Amedisys (AMED) to Your Portfolio

Zacks Equity Research

Amedisys, Inc. AMED has been gaining investors’ confidence on consistently positive results. Over the past year, the company’s share price has outperformed its industry. The stock gained 94.3% against 18.5% fall recorded by the industry. The company also outperformed the S&P 500’s 0.6% decline.

This renowned home health and hospice services provider has a market cap of $3.79 billion. The company’s five-year projected growth rate is favorable at 19.7% compared with the industry’s 12.3%.

With solid prospects, this Zacks Rank #2 (Buy) stock is an attractive pick for investors at the moment.

 

 

Per our Style Score, Amedisys has a Growth Score of A, which is reflective of the company’s solid prospects. Our research shows that stocks with a Growth Style Score of A or B combined with a Zacks Rank #1 (Strong Buy) or 2 offer the best upside potential.

What Makes the Stock an Attractive Pick?

Favorable CMS Ruling

Per Amedisys, Center for Medicare and Medicaid Services (“CMS”) issued a final rule, which updates the Medicare Home Health Prospective Payment System ("HHPPS") rates and wage index for calendar year ("CY") 2019. Per the rule, there will be 2.2% ($420 million) rise in payments to Home Health agencies ("HHA") in CY 2019. Furthermore, the latest CMS regulation finalizes the implementation of an alternative case-mix adjustment methodology — the Patient Drive Groupings Model ("PDGM"). The PDGM has been planned to be implemented in a budget neutral manner on Jan 1, 2020.

Based on patient characteristics for a 30-day period of care, the PDGM will adjust payments to home health agencies, providing home health services under Medicare Fee-For-Service. Moreover, it will remove the use of therapy visits in the determination of payments. In a scenario where Medicare payments form around 73-73% of the company’s net service revenues over the past three years, such favorable rulings seem to be encouraging.

Improving Clinical Quality

Amedisys is currently focusing on improving clinical quality. In this regard, we take note that the company’s January 2019 STARs score preview by CMS puts it at an average of 4.4 stars. The company now has 69 care centers rated at 5 stars, with 94% of overall portfolio rated at 4 stars or better. Patient Satisfaction average, per the most recent evaluation, was 3.96. Notably, it outperformed the industry average of 3.70. Amedisys is targeting to achieve a 4.0 Quality Star Rating for all its care centers.

Personal Care Prospects Bright

Recently, the company integrated a new operating segment within its business — Personal Care. During the fourth quarter of 2018, net service revenues totaled $21.6 million, reflecting a 19.3% increase from the year-ago number. Per management, this segment is stabilizing and performing as per expectation. Moreover, the company is working on expanding the geographical presence of the Personal Care business through inorganic expansion.

Amedisys is integrating tuck-in acquisitions like Bring Care Home, East Tennessee Personal Care Services and Intercity. Per the company, these buyouts will enlarge its personal care footprint outside of Massachusetts and Florida.

Which Way Are Estimates Heading?

For the current quarter, the Zacks Consensus Estimate for earnings is pegged at 89 cents, reflecting year-over-year growth of 12.7%. The same for revenues stands at $433.1 million, mirroring a year-over-year improvement of 8.5%.

For 2019, the Zacks Consensus Estimate for earnings is pinned at $4.04. The same for revenues is pegged at $1.81 billion.

Other Key Picks

Some othertop-ranked stocks in the broader medical space are Veeva Systems Inc. VEEV, Hologic, Inc. HOLX and Integer Holdings Corporation ITGR.

Veeva Systems’ long-term earnings growth rate is projected at 14.8%. The stock currently carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Integer Holdings projects earnings growth rate of 31.2% for the first quarter. It currently carries a Zacks Rank #2.

Hologic’s long-term earnings growth rate is projected at 8.9%. The stock presently has a Zacks Rank #2.

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