It has been about a month since the last earnings report for Mednax (MD). Shares have lost about 5.1% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Mednax due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
MEDNAX's Earnings Beat Estimates in Q2, Decrease Y/Y
MEDNAX delivered second-quarter 2019 adjusted earnings of 80 cents per share, beating the Zacks Consensus Estimate by 2.6%. However, the bottom line declined 19.2% year over year due to lower revenue stream.
The company generated revenues of $868 million, in line with the Zacks Consensus Estimate. Although the top line fell 5.2% from the year-ago period, mainly due to non-renewal of certain contracts, the same unit revenues inched up 1.1% year over year owing to volume expansion.
However, this upside was offset by the decrease in maternal-fetal medicine services.
General and administrative expenses were down 2.6% to $103.5 million.
Interest expense of the company escalated 43.8% to $31 million, primarily due to higher effective interest rate on the borrowings between two periods.
In the quarter under review, EBITDA totaled $131 million, down by nearly 9.8%.
As of Jun 30, 2019, the company had cash, cash equivalents and restricted cash of about $40.2 million, down 11.5% from the level at 2018 end.
The company incurred total debt of $2 billion, up 5.4% from 2018-end level and total assets of $5.6 billion, down 5.7% from the level at 2018 end.
Cash flows from operating activities were $115.3 million, down 12.7% year over year.
Share Repurchase Update
The company bought back shares worth $65.5 million in the second quarter of 2019.
The company reported an incremental non-cash impairment charge of $50 million, net of the related income tax benefit, in the second quarter. This was to reduce the MedData net assets.
For the third quarter of 2019, the company expects adjusted EPS to be in the band of 88-96 cents.
This company assumes that total same-unit revenue growth for the three months ended Sep 30, 2019 to be in the 1-3% range, from the prior-year period.
Mednax expects its Adjusted EBITDA to be between $130 million and $140 million.
Following second-quarter results, the company estimates adjusted EBITDA to be at lower end of its previous projection ($505-$535 million) or $505 million at the mid-point.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
Currently, Mednax has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions has been net zero. Notably, Mednax has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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