Q1 Loss Wider than Expected at Amedisys - Analyst Blog


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Home healthcare provider Amedisys Inc. ( AMED ) recorded an adjusted loss from continuing operations of 7 cents per share in the first quarter of 2014, a massive downfall from the adjusted income from continuing operations of 15 cents per share earned in the year-ago quarter. Adjusted loss was also wider than the Zacks Consensus Estimate of a loss of 6 cents. Per management, the primary factor that led to the earnings downfall was the impact of weather-related costs.

Barring any adjustment, the quarter's reported loss came in at 39 cents a share, which compared unfavorably with the net income of 15 cents per share earned in the year-ago period.

However, following the announcement on May 8, the stock price of Amedisys which was pegged at $13.36, made no movement till closing on May 9. 

Quarter in Detail

Amedisys primarily derives revenues from its home health and hospice agencies. First-quarter net service revenues grossed $298.7 million, down 9.0% year over year. The top line also missed the Zacks Consensus Estimate of $300 million by a whisker.

Within the company's Home Health division, net service revenues were $236.7 million (down 9.7% year over year) with Medicare revenues of $188.7 million and non-Medicare revenues of $48.0 million.

Within the Hospice division, net service revenues were $62.0 million (down 6.9% year over year) including Medicare revenues of $58.4 million and non-Medicare revenues of $3.6 million.

The company reported a 274 basis points (bps) contraction in gross margin to 40.7% in the quarter. Expenses on salaries and benefits declined 4.2% to $83.2 million, while other expenses fell 2.03% to $42.7 million. Amedisys posted adjusted operating loss of $4.1 million compared to adjusted operating profit of $21.2 million in the quarter.

Amedisys exited the quarter with cash and cash equivalents of $2.84 million compared with $17.3 million at the end of 2012. The company's long-term obligations (including current portion) were $42.9 million as against $46.9 million at the end of 2013. Net cash used in operating activities in the quarter was $6.34 million, down from year-ago net operating cash flow of $32.4 million.

Our Take

Amedisys posted yet another disappointing quarter with sustained volume pressure. We believe that poor segment performance, sluggish growth trend and the adverse impact from sequestration led to the dismal first-quarter results. Moreover, the fact that no guidance has been provided for the current fiscal, failed to inspire confidence.

We believe that the highly uncertain home nursing reimbursement environment, coupled with significant reduction in Medicare reimbursement in the recent past has affected Amedisys' performance over the past few quarters. We expect the healthcare reimbursement pressure to persist even in 2014, thereby retaining chances of weakening the company's performance further.

Currently, the stock carries a Zacks Rank #3 (Hold). Some of the better-ranked stocks in the broader healthcare space that warrant a look include Mead Johnson Nutrition Company ( MJN ), Natus Medical Inc. ( BABY ) and Masimo Corporation ( MASI ). All three stocks carry a Zacks Rank #2 (Buy).

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AMEDISYS INC (AMED): Free Stock Analysis Report

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MEAD JOHNSON NU (MJN): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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