On Feb 19, 2013 we retained
Health Management Associates
) at Neutral after the company missed Zacks Consensus Estimate
for earnings but beat revenue estimate in the fourth quarter
2012. We continue to have doubts about sustained growth in
volumes. Our skepticism is supported by a drop in (same hospital)
admissions and volume pressure in the fourth quarter.
Why the Retention?
On Feb 14, Health Management posted fourth-quarter 2012
adjusted earnings of 19 cents per share, missing the Zacks
Consensus Estimate of 20 cents per share. Revenues in the
reported quarter increased 8.3% year over year to $1,715 million,
beating the Zacks Consensus Estimate of $1,686 million.
Over the past 30 days, the Zacks Consensus Estimate for 2013
has moved up by just 3 cents to 87 cents while for 2014 it has
inched up by a penny to $1.08 during the same timeframe.
We believe that bad debt may no longer be an area of looming
concern. Bad debt expense remained within a band at 13.7% of
revenues in the fourth-quarter of 2012, higher than 12.3% in the
year-ago quarter. We expect Health Management's bad debt expense
to be restrained in 2013.
Overall, total uncompensated care (the total of uninsured
discounts, indigent/charity write-offs, and provision for bad
debt as a percentage of adjusted revenue) was on the higher side
at 28.7% in fourth-quarter, up from 25.4% in the prior-year
Other Stocks to Consider
Health Management currently carries a Zacks Rank #3 (Hold).
Acadia Healthcare Company, Inc.
) carries a Zacks Rank #2 (Buy) and is expected to do well.
Merge Healthcare Incorporated
) retains a Zacks Rank #2 (Buy) and warrants a look.
ACADIA HEALTHCR (ACHC): Free Stock Analysis
HEALTH MGT ASSC (HMA): Free Stock Analysis
MERGE HEALTHCAR (MRGE): Free Stock Analysis
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