Home healthcare provider
) recorded adjusted (after adding back for exit activity costs,
gain on sale of care centers and legal fees) earnings per share
of 17 cents in the second quarter of 2013, a massive downfall
from 29 cents in the year-ago quarter. Apart from the declining
top line, margin contraction and higher share count led to the
earnings downfall. Per management, the sequestration cut and
volume decline adversely affected bottom line by 9 cents.
However, the result sailed past the Zacks Consensus Estimate of
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On a reported basis, Amedisys posted net income of $1.8 million
or 6 cents per share in the second quarter, a considerable slide
from net income of $7.9 million or earnings of 26 cents in the
Quarter in Detail
Amedisys primarily derives revenues from its home health and
hospice agencies. Second-quarter net service revenue came in at
$313.1 million, down 13.7% year over year. The adverse impact of
sequestration hurt revenues by about $5 million while the
remainder of the downfall was on account of significantly low
volumes in its segments. Revenues also trailed the Zacks
Consensus Estimate of $326 million.
For the company's Home Health division, net service revenue was
$248.6 million (down 14.5% year over year) with Medicare revenues
of $202.9 million and non-Medicare revenues of $45.7 million in
the quarter. The decline was due to lower recertification,
sustained volume pressure and the impact of sequestration.
For the hospice division, net service revenue was $64.5 million
(down 11% year over year) including Medicare revenues of $60.8
million and non-Medicare revenues of $3.7 million in the quarter.
Lower admissions in the quarter and the sequestration cut led to
the decrease in segment revenues.
The company reported a 40 basis points (bps) contraction in gross
margin to 43.8% in the quarter. Expenses on salaries and benefits
declined 10.1% to $74.6 million, while other expenses decreased
9.9% to $41.1 million. Amedisys posted operating margin
contraction of 220 bps to 4.9% in the quarter.
Amedisys exited the quarter with cash and cash equivalents of
$30.1 million compared with $14.5 million at the end of 2012. The
company's long-term obligations (including current portion) were
$74.8 million compared with $1,027.1 million at the end of 2012.
Net cash provided by operating activities in the quarter was
$33.6 million, up 54.5% year over year.
Following another weak quarter, Amedisys tweaked its sales
guidance for 2013. Net service revenue is envisaged in the range
of $1.24-$1.28 billion compared with $1.28-$1.32 billion earlier.
The Zacks Consensus Estimate of $1.31 lies outside the revised
The company continues to envisage earnings per share in the range
of 45 to 55 cents. The Zacks Consensus Estimates of 51 cents for
2013 is within the outlook band.
Amedisys posted another weak quarter with sustained volume
pressure. Although the company's earnings surpassed the Zacks
Consensus Estimate, it missed the Zacks Consensus Estimate for
top line for the fourth consecutive quarter. We believe that poor
segment performance, sluggish growth trend and the adverse impact
from sequestration led to the dismal second-quarter results. The
revised sales guidance for 2013, which lies below our
projections, also failed to inspire confidence.
We believe that 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 2013, thereby weakening
the company's performance further.
Accordingly, we prefer to avoid Amedisys. The stock carries a
Zacks Rank #4 (Sell). On the other hand, medical sector stocks
worth considering are
Align Technology Inc.
). These stocks carry favorable Zacks Rank #1 (Strong Buy).