) reported earnings per share ("EPS") of 49 cents in the third
quarter of 2012, up 9% compared to year-ago quarter's adjusted
EPS of 45 cents. Reported EPS was in line with the Zacks
Consensus Estimate and remained at the higher end of the
company's guidance range of 47−49 cents. Revenues during the
quarter increased 16% year over year to $226.4 million almost in
line with the Zacks Consensus Estimate.
The significant upside in revenues was primarily attributable
to a 2% rise in same-center revenues combined with an increase in
the number of operating centers to 229 at the end of third
quarter 2012 (from year-ago 223 centers ), even with one less
business day in the quarter. Further, the new centers delivered
an 8% year-over-year increase in total procedures with 7% jump in
revenue per procedure as multi-specialty centers grew as a
percentage of center mix.
Operating expenses increased 17.8% year over year to $151.6
million due to higher salaries and benefits (up 20.2% to $72.7
million), supply cost (up 25.5% to $31.5 million) and other
operating expenses (up 9.7% to $47.3 million). As a result,
operating margin declined 80 basis points to 33.1% during the
AmSurg exited the quarter with $35.7 million in cash and cash
equivalents versus $40.7 million at the end of 2011, and had $179
million available under its revolving credit facility. For the
third quarter, net cash flows from operating activities were
$72.5 million compared with $62.6 million in the year-ago
AmSurg increased the lower end of its 2012 revenue guidance by
$10 million to $915−$925 million, just short of the current Zacks
Consensus Estimate of $926 million. The company also narrowed the
adjusted EPS outlook for 2012 to $1.98−$2.01 from earlier range
of $1.97−$2.01 (the current Zacks Consensus Estimate is
Further, the company adjusted its same-center revenue growth
forecast to 3% (earlier guidance was 2−3%). Net cash flow
provided by operating activities, less distribution to
non-controlling interests, is expected to be in a range of
$115−$120 million for 2012 (unchanged).
Additionally, AmSurg also provided its EPS guidance for the
fourth quarter of 2012. The company expects EPS in the range of
48−51 cents. The current Zacks Consensus Estimate of 51 cents
remains at the high end of the range.
We are encouraged by AmSurg's impressive third quarter results
with improvement in same-center sales in successive quarters and
increase in 2012 guidance even amid uncertain economic conditions
and high unemployment. The company reported expansion in top line
on the back of growth in total procedures, mainly with the
opening of new centers and solid same-center performances. During
the reported quarter, the company acquired one center and had 15
centers under a letter of intent.
We expect AmSurg to go ahead with its acquisition pipeline,
supported by a strong cash position. Government agencies have
undertaken initiatives to curtail healthcare expenditure, thereby
resulting in a shift toward ambulatory surgery centers from
admission to traditional hospitals.
However, the company is encountering several challenges such
as reimbursement issues, higher expenses and economic
uncertainty. Collectively these result in deferring elective
procedures with a decline in doctor visits by patients, and
thereby decreasing surgical volume. This also mounts pressure on
margins. Moreover, competitive landscape is tough with the
presence of players such as
HCA Holdings, Inc.
Currently, AmSurg retains a short-term Zacks #4 Rank (Sell
rating). Over the long term, we are Neutral on the stock.
AMSURG CORP (AMSG): Free Stock Analysis
HCA HOLDINGS (HCA): Free Stock Analysis
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