Here's Why You Should Retain Amedisys (AMED) Stock for Now
Amedisys AMED is well-poised for growth in the coming quarters, with several strategic acquisitions and partnerships in the pipeline. In the fourth quarter of 2022, the company experienced the positive momentum of its high-acuity care acquisition, Contessa. However, exposure to the competitive market and an unfavorable ruling issued by the Centers for Medicare & Medicaid Services (“CMS”) are major downsides.
In the past year, this Zacks Rank #3 (Hold) stock has declined 55.9% compared with the 18.8% decline of the industry and an 11.4% fall of the S&P 500 composite.
The leading at-home healthcare company has a market capitalization of $2.39 billion. The company projects earnings growth of 10.33% in 2024 while making significant improvements in its business. Amedisys surpassed estimates in three of the trailing four quarters and missed the same in one, delivering an earnings surprise of 8.92%, on average.
Let’s delve deeper.
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Upsides
Improvement in Clinical Quality: In the April 2023 preview of the CMS Star Ratings release, Amedisys received an average rating of 4.49 stars out of a possible 5 stars. 99% of Amedisys’ home healthcare centers achieved a rating of 4 stars, while 46 care centers were rated five stars.
In its January 2023 release, Amedisys received 3.57 stars in Patient Satisfaction, 1% higher than the industry average. During the fourth quarter of 2022 earnings call, the company noted that its patient satisfaction remains greater than 85%.
Value Generated From Strategic Acquisitions & Partnerships: Amedisys is developing and acquiring new business lines. These will complement its existing home care and hospice business, for effective healthcare management.
In February 2023, Amedisys partnered with BlueCross BlueShield of Tennessee to provide members in Middle Tennessee with home-based palliative care either in-person or via telehealth from Amedisys’ clinicians, including doctors, nurse practitioners and nurses at no additional cost.
In the same month, Amedisys announced the divestiture of its Personal Care division to HouseWorks, LLC, in a move to focus on the core business units of Home Health, Hospice and High Acuity Care.
In December 2022, Amedisys completed its joint venture with the University of Arkansas for Medical Sciences to provide home health services in Searcy and Little Rock.
Impressive Fourth-Quarter Performance: Amedisys reported better-than-expected earnings and revenues in the fourth quarter.
For 2023, the company remains confident about generating approximately $50 million in revenues from the newly formed high-acuity segment, Contessa Health, driven by increased volumes from their current and signed JV partners.
The company intends to make progress in forming direct relationships with health systems, partnering with a leading comprehensive care at-home provider and health plans interested in value-based arrangements for in-home services.
Downsides
A Competitive Landscape: The market for home health and hospice is fragmented, with many small local providers.
Amedisys primarily faces tough competition from the local, private, and publicly owned and hospital owned health care providers. The company competes with several non-profit organizations, that finance acquisitions and capital expenditures on a tax-exempt basis or receive charitable contributions that are unavailable to the company.
It also competes based on the availability of personnel, the quality of services, the expertise of visiting staff and the price of services.
Proposed CMS Ruling Turns Unfavorable: In October 2022, CMS issued the final rule, regarding the 2023 Home Health Prospective Payment System Rate Update.
Estimates indicate that the final rule will result in a 0.7% increase in payments to home-health providers. This increase reflects the result of a 4.0% home-health payment update and an estimated increase of 0.2%, reflecting the fixed-dollar loss ratio update. The ratio is used in determining outlier payments.
However, the increase is partially offset by a permanent adjustment of -3.5% based on the difference between assumed and actual behavioral changes resulting from the implementation of PDGM.
Estimate Trend
Amedisys has been witnessing a negative estimate revision trend for 2023. In the past 90 days, the Zacks Consensus Estimate for its earnings has moved 3.9% south to $4.93.
The Zacks Consensus Estimate for the company’s 2023 revenues is pegged at $2.26 billion, suggesting a 1.8% rise from the year-ago reported number.
Key Picks
Some better-ranked stocks in the broader medical space are Orthofix Medical OFIX, Hologic, Inc. HOLX and Insulet PODD.
Orthofix Medical, carrying a Zacks Rank #2 (Buy) at present, has an estimated growth rate of 57.71% for the next year. Orthofix’s earnings surpassed the Zacks Consensus Estimate in three of the trailing four quarters and missed the same in one, the average surprise being 140.02%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Orthofix Medical’s shares have decreased 49.5% compared with the industry’s 16.3% decline in the past year.
Hologic, carrying a Zacks Rank #2 at present, has an estimated long-term growth rate of 15.2%. Shares of HOLX have risen 5.9% against the industry’s 16.9% decline over the past year.
HOLX’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 30.6%.
Insulet, carrying a Zacks Rank #2 at present, has an estimated growth rate of 56.59% for 2024. Insulet’s shares have risen 17.7% against the industry’s 38.5% decline over the past year.
PODD’s earnings surpassed estimates in three of the trailing four quarters and missed the same in one, the average surprise being 59.81%.
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Amedisys, Inc. (AMED) : Free Stock Analysis Report
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