Yahoo Finance Here's Why You Should Retain Amedisys (AMED) Stock for Now
Amedisys, Inc. AMED has been gaining from the robust performance of the Home Health and Hospice segments. The company ended the first quarter of 2022 with better-than-expected earnings. The company has reaffirmed its outlook for 2022, which buoys optimism in the stock. However, a weak margin scenario and tough competition raise concerns.
Over the past year, the Zacks Rank #3 (Hold) stock has declined 55.2% compared with a 48.4% fall of the industry and 7% fall of the S&P 500.
The renowned home health and hospice service provider has a market capitalization of $3.82 billion. Amedisys’ earnings for the first quarter of 2022 surpassed the Zacks Consensus Estimate by 10.8%.
Let’s delve deeper
Key Growth Catalysts
Q1 Upsides: Amedisys ended the first quarter of 2022 with better-than-expected earnings. The top line registered year-over-year growth on robust performances across the Home Health and Hospice segments. For Home Health, first-quarter total admissions improved 2% year over year.
On the clinical mix, the company achieved 48% LPN (Licensed Practical Nurse) utilization and 53% PTA (Physical Therapist Assistant) utilization in the reported quarter. Within the Hospice business, the company made significant progress in hiring hospice BD full-time equivalent (FTE) staff, ending the quarter with 514 hospice BD FTEs.
Strategic Acquisitions and Partnerships to Add Values: In April 2022, Amedisys acquired certain home health assets from AssistedCare Home Health, Inc. and RH Homecare Services, LLC, doing business as AssistedCare Home Health and AssistedCare of the Carolinas, respectively. With the purchases, Amedisys will provide additional scale and resources, which will expand its opportunities to care for more patients in more communities across North Carolina.
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In the same month, Amedisys acquired Evolution Health, a provider of home health services. Evolution Health is a division of Envision Healthcare, which is doing business as Guardian Healthcare, Gem City and Care Connection of Cincinnati in 15 locations across Texas, Oklahoma and Ohio. By continuing the great care provided by Guardian Healthcare, Gem City and Care Connection of Cincinnati, Amedisys can now offer home health and hospice services in more communities across Texas, Oklahoma and Ohio.
Bullish Outlook: The company has reaffirmed its 2022 outlook, which looks encouraging. For 2022, the company anticipates net service revenues of $2.33-$2.37 billion. The Zacks Consensus Estimate for 2022 revenues is pegged at $2.36 billion.
Adjusted EPS is projected to be $5.23-$5.45. The Zacks Consensus Estimate for the same is pegged at $5.31.
Downsides
Pressure on Margins Remains: In the first quarter, Amedisys’ expenses on salaries and benefits rose 6.6%. Other expenses increased 9.2%. The escalating costs and expenses are building pressure on the company’s bottom line. The gross margin in the reported quarter contracted 57 basis points (bps) to 44.1%. The adjusted operating margin fell 234 bps to 10.3% from the prior-year level.
Competitive Landscape: The market for home health and hospice is fragmented, with a number of small local providers. With a few barriers to entry in this market, Amedisys primarily faces tough competition from local privately and publicly-owned, and hospital-owned health care providers.
Estimate Trend
Over the past 30 days, the Zacks Consensus Estimate for Amedisys’ 2022 earnings has moved down by 0.4% to $5.29.
The Zacks Consensus Estimate for the company’s 2022 revenues is pegged at $2.35 billion, suggesting a 5.9% rise from the 2021 reported number.
Key Picks
A few better-ranked stocks in the broader medical space are UnitedHealth Group Incorporated UNH, Medpace Holdings, Inc. MEDP and Alkermes plc ALKS.
UnitedHealth, having a Zacks Rank #2 (Buy), reported first-quarter 2022 earnings per share (EPS) of $5.49, which beat the Zacks Consensus Estimate by 1.7%. Revenues of $80.1 billion outpaced the consensus mark by 14.2%.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
UnitedHealth has an estimated long-term growth rate of 14.8%. UNH’s earnings surpassed estimates in the trailing four quarters, the average surprise being 3.7%.
Medpace reported first-quarter 2022 adjusted EPS of $1.69, which surpassed the Zacks Consensus Estimate by 34.1%. Revenues of $330.9 million outpaced the Zacks Consensus Estimate by 1.1%. It currently has a Zacks Rank #2.
Medpace has a historical growth rate of 27.3%. MEDP’s earnings surpassed estimates in the trailing four quarters, the average surprise being 17.1%.
Alkermes reported first-quarter 2022 adjusted EPS of 12 cents, which surpassed the Zacks Consensus Estimate of a penny. Revenues of $278.6 million outpaced the Zacks Consensus Estimate by 6.2%. It currently sports a Zacks Rank #2.
Alkermes has an estimated long-term growth rate of 25.1%. ALKS’ earnings surpassed estimates in the trailing four quarters, the average surprise being 350.5%.
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