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Envision Healthcare: Strong Sell on Weak Q3, Slashed View

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On Nov 20, Zacks Investment Research downgraded Envision Healthcare Holdings Inc . EVHC to a Zacks Rank #5 (Strong Sell). The downgrade reflects unimpressive third-quarter 2015 results, slashed outlook and growing near-term headwinds.

Why the Downgrade?

Envision reported earnings of 30 cents per share that not only declined 14.3% on a year-over-year basis but also missed the Zacks Consensus Estimate by 9 cents in the third quarter.

Revenues jumped almost 19% year over year to $1.37 billion but lagged the Zacks Consensus Estimate of $1.42 billion. Moreover, adjusted EBITDA declined 7.3% from the year-ago quarter to $142.5 million, primarily attributed to challenges at the EmCare Physician Services segment.

EmCare EBITDA plunged 14.4% to $86.4 million, primarily because of lower same-store revenue growth and higher cost of services. Increased contract losses and insurance reserves also weighed on EBITDA.

Net new contract growth for EmCare was 6.9%, while revenue from new contract growth was 11.4%. The impact of terminations during the third quarter reduced revenue by 8.1%. However, management expects net new contract growth from the fourth quarter of 2015 to be lower than in previous quarters due to the anticipated impact of contract terminations.

Envision forecasts adjusted EBITDA of $600-$605 million for full-year 2015 (down from earlier guided range of $653 to $665 million). Adjusted earnings are projected in the range of $1.28 to $1.30 per share (down from the earlier guided range of $1.42 to $1.50).

Estimate Revisions

The Zacks Consensus Estimate for fiscal 2015 contracted almost 12.3% (18 cents) to $1.28 per share over the last 30 days. Similarly, for fiscal 2016, the Zacks Consensus Estimate declined 12.2% (17 cents) to stand at $2.16 per share over the same time frame.

Stocks to Consider

One may consider some better-ranked players in the industry like Air Methods AIRM , AMN Healthcare AHS and HealthEquity HQY . All the three stocks sport a Zacks Rank #1 (Strong Buy).

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AIR METHODS CRP (AIRM): Free Stock Analysis Report

ENVISION HLTHCR (EVHC): Free Stock Analysis Report

HEALTHEQUITY (HQY): 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.


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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