We have reiterated our Neutral recommendation on
) with a target price of $30.00.
Even amidst headwinds like reimbursement issues, higher expenses
and economic uncertainty, AmSurg's adjusted EPS for the first
quarter of fiscal 2012 came in at 50 cents, up 35% year over year,
and ahead of the Zacks Consensus Estimate by 2 cents.
AmSurg also delivered strong revenue growth during the reported
quarter. Revenues were up 30% year over year to $230.2 million and
exceeded the Zacks Consensus Estimate of $219 million.
This was primarily driven by the addition of several new centers
through acquisitions and development of additional ambulatory
surgery centers (ASC). Demand for lower risk, high volume surgical
procedures performed by ASCs grew steadily during the quarter,
consistent with the demographics of an aging US population.
Moreover, with the National Surgical Care (NSC) acquisition last
year, AmSurg diversified its business to include orthopedics
andmulti-specialty centers and expanded its portfolio to 46
multi-specialty centers, the largest in this space.
Meanwhile, we are encouraged by the company's same-center growth
of 5% in the quarter (2% of this was due to a mild weather)
primarily due to a significant increase in patient visits. The
same-center sales continued to grow for the past one year and the
reported quarter represented the best same-center performance since
On the back of solid same-center performance during the quarter,
the company increased its same-center revenue guidance to 1%−3%
from the previous guidance of 0%−2% for 2012.
Moreover, with a strong cash balance and revolving credit
facility, AmSurg is well poised to pursue further acquisitions that
will boost its top line going ahead. The company is even looking
for potential large-chain acquisitions.
We are also encouraged to note that many physicians prefer ASCs
because these centers provide greater scheduling flexibility, more
consistent nurse staffing and faster turnaround time between cases,
allowing them to perform more surgeries in a specified time
Moreover, ambulatory surgery is comparatively less expensive
than hospital-based surgery due to lower facility development
costs, more efficient staffing and space utilization. We expect all
these to work as the major catalysts for the company to increase
its foothold in the ambulatory surgery space.
However, economic uncertainty together with unemployment lead to
fewer individuals enjoying company-provided insurance, which
impacts elective procedures such as hip and knee replacements, as
well as screening procedures such as colonoscopies. Further, ASCs
are highly dependent on third-party reimbursement programs
including governmental and private insurance programs to pay on
behalf of patients.
We remain concerned regarding AmSurg's dependency on Medicare
for payments, given that the company derived 29% of its revenues
from governmental healthcare programs, particularly Medicare,
during fiscal 2011.
Also, for the past few years, government programs, private
insurance companies and managed care organizations have implemented
various cost-cutting measures to limit healthcare expenditure.
Moreover, competitive landscape is tough with the presence of
players such as
HCA Holdings, Inc
Presently, AmSurg has a Zacks #2 Rank (short-term Buy rating).
Considering the fundamentals of AmSurg, we remain Neutral on the
stock over the long term.
AMSURG CORP (AMSG): Free Stock Analysis Report
HCA HOLDINGS (HCA): Free Stock Analysis Report
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