On Jan 2, 2014, we reiterated our Neutral recommendation on
), a major operator of single-specialty practice-based ambulatory
surgery centers (ASCs). While we are optimistic about the
company's double-digit sales growth in the past several quarters
owing to new centers and improved same-center sales, our concerns
linger around challenges like reimbursement issues and economic
uncertainty. The stock currently carries a Zacks Rank #3
Why at Neutral?
AmSurg's third-quarter earnings per share (EPS) of 53
centswere up 10% year over year, marking the company's second
consecutive quarter of double-digit growth. However, earnings
were on par with the Zacks Consensus Estimate and also touched
the upper end of the company's guidance range of $0.51−$0.53.
Revenues increased 19% to $268.2 million beatingthe Zacks
Consensus Estimate of $266 million.
AmSurg has made satisfactory progress with several quarters of
double-digit sales growth. Even amid uncertain economic
conditions and high unemployment, we are encouraged by AmSurg's
third-quarter revenue growth of 19%. The company reported
expansion in top line on the back of growth through strong
performance of the acquired centers.
We are also encouraged with the company's newly formed joint
venture with a hospital system and expect AmSurg to advance on
its acquisition pipeline, supported by a strong cash position.
Government agencies have undertaken initiatives to curtail
healthcare expenditure, thereby inducing a shift toward
ambulatory surgery centers from admission to traditional
However, we are concerned with the decline in same-center
sales after seven successive quarters of improvements. Moreover,
AmSurg is encountering several challenges in the form of
reimbursement issues and economic uncertainty. The full impact of
sequestration on AmSurg's operations is uncertain, but if action
is not taken immediately, the Budget Control Act (BCA)-mandated
spending reductions will translate into greater spending
reductions for AmSurg.
If sequestration continues to be implemented as currently
structured, the company estimates spending reductions to cut 2013
revenues and earnings by $5.0 million and $0.05 a share,
Other Stocks to Consider
While we prefer to remain on the sidelines regarding AmSurg at
present, some better-ranked medical device stocks are
Addus HomeCare Corp.
). While Given Imaging and Addus HomeCare sport a Zacks Rank #1
(Strong Buy), HEALTHSOUTH carries a Zacks Rank #2 (Buy).
ADDUS HOMECARE (ADUS): Free Stock Analysis
AMSURG CORP (AMSG): Free Stock Analysis
GIVEN IMAGING (GIVN): Free Stock Analysis
HEALTHSOUTH CP (HLS): Free Stock Analysis
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