AmSurg Corp. ( AMSG )
reported earnings per share (EPS) of 51 cents in the second quarter
of fiscal 2012, up 21% year over year. Reported EPS was also ahead
of the Zacks Consensus Estimate by a penny and remained at the
higher end of the company's guidance range of 49−51 cents. Revenues
during the quarter increased 23% year over year to $231.6 million
and exceeded the Zacks Consensus Estimate of $229 million.
The significant upside in revenues during the quarter represented
the third consecutive quarter of over 20% sales growth. This was
primarily attributable to a 3% rise in same-center revenues
combined with an increase in the number of operating centers to 228
at the end of the second quarter 2012 (from year-ago 206 centers ).
Further, the centers delivered a 14% year-over-year increase in
procedures with 8% jump in revenue per procedure.
Moreover, AmSurg opened one de novo center during the reported
quarter and had seven centers under letter of intent at the end of
Operating expenses increased 25.8% year over year to $152.8
million due to higher salaries and benefits (up 24.2% to $70.9
million), supply cost (up 38.6% to $33.2 million) and other
operating expenses (up 20.5% to $48.7 million). As a result,
operating margin declined 108 basis points to 34.15% during the
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AmSurg exited the quarter with $37.6 million in cash and cash
equivalents versus $40.7 million at the end of fiscal 2011, and had
$159 million available under its revolving credit facility. For the
second quarter, net cash flows from operating activities were $74.5
million compared with $61.7 million in the year-ago quarter.
AmSurg reiterated its EPS and revenues guidance for fiscal 2012.
The company expects adjusted EPS in the range of $1.97−$2.01 (the
current Zacks Consensus Estimate is $2.01) on revenues of $905−$925
million (the Zacks Consensus Estimate is $922 million) for 2012.
However, the company tightened its same-center revenue growth
forecast to 2−3% (earlier guidance was 1−3%). Net cash flow
provided by operating activities, less distribution to
non-controlling interests, is expected to be in a range of $115
million to $120 million for 2012 (unchanged).
Additionally, AmSurg also provided its EPS guidance for the third
quarter of fiscal 2012. The company expects EPS in the range of
47−49 cents, lower than the current Zacks Consensus Estimate of 50
We are encouraged by AmSurg's strong second quarter result with
improvement in same-center sales in successive quarters even amid
uncertain economic conditions and high unemployment. We expect the
company to benefit over the long term from favorable industry
For the past few years, government programs, private insurance
companies and managed care organizations have implemented various
cost-cutting measures to limit healthcare expenditure. Demand for
lower-risk, high-volume surgical procedures performed byambulatory
surgery centers ( ASC) continue to grow, consistent with the
demographics of an aging US population. Government agencies have
been undertaking initiatives to curtail healthcare expenditure
resulting in a shift toward ASCs from traditional hospitals.
However, competitive landscape is tough with the presence of
players such as HCA Holdings, Inc. ( HCA
Currently, AmSurg retains a short-term Zacks #3 Rank (Hold
rating). Over the long term, we are Neutral on the stock.