On May 13, we downgraded
Health Management Associates Inc.
) to Underperform based on its first quarter 2013 results.
On May 2, Health Management announced results for the reported
quarter. Earnings per share of 13 cents matched the Zacks
Consensus Estimate. However, net income at Health Management
decreased 38.7% year over year to $23.1 million (or 9 cents per
Revenues (prior to provisioning for doubtful clients)
increased about 2.2% year over year to $1,723.8 million, missing
the Zacks Consensus Estimate of $1,744 million. Net revenues from
same hospital decreased 1% to $1,470 million. Same hospital
admissions and adjusted admissions dipped 8.8% and 5.8%,
respectively, while surgeries and emergency room visits decreased
5.6% and increased 1%, respectively.
A rise in observation stay was a factor in the drop of same
hospital admissions. Many hospitals in Florida are seeing
heightened pressure from payers to put patients under
observation. Overall observation stays moved up 14.1% year over
year in the first quarter 2013.
Total uncompensated care (the sum of uninsured discounts,
charity/indigent write-offs, and bad debt expense as a percentage
of adjusted revenue) was on the higher side at 28.6% in
first-quarter 2013, up from 26.1% in the prior-year quarter. Bad
debt expense was 14% of revenues in the first quarter 2013,
higher than 11.9% in the year-ago quarter.
Health Management tightened its guidance range for earnings
per share from 86 cents to $1.01 to 86 cents to 95 cents for
The Zacks Consensus Estimate for 2013 has dropped 4.3% to 88
cents over the last 30 days. It has declined 6.4% to $1.03 for
2014 over the same timeframe.
We currently have a Zacks Rank #5 (Strong Sell) on Health
Management. We are more positive about
Acadia Healthcare Company, Inc.
), which carries a Zacks Rank #2 (Buy).
Intuitive Surgical, Inc.
HeartWare International Inc.
) are two other Zacks Rank #2 (Buy) stocks, which are expected to
ACADIA HEALTHCR (ACHC): Free Stock Analysis
HEALTH MGT ASSC (HMA): Free Stock Analysis
HEARTWARE INTL (HTWR): Free Stock Analysis
INTUITIVE SURG (ISRG): Free Stock Analysis
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