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AmSurg (AMSG) had a Momentum Breakout Buy signal above 60, after reporting better than expected 4th quarter earnings on February 25. AMSG moved to a new high above 62 and had been consolidating those gains while continuing to attract institutional buying at these lofty levels. The stock worked off the overbought condition early last week as it dipped under 59 and then rallied to make a new high above 62. The impetus for the rally was the acquisition of Radiology Associates of Hollywood, a leading provider of radiology services in South Florida. This was accomplished in their recently acquired Sheridan Healthcare subsidiary.
Piper Jaffrey analyst Kevin Ellich recently upgraded AMSG to a buy with a $65 price target. I suspect that further upgrades from other analysts will follow in the wake of last week’s activity. He stressed last year’s acquisition of Sheridan Healthcare as an aggressive move that transformed AmSurg from a “slow, sleepy ambulatory surgery center” into a growth player in the more robust hospital outsourcing market. This point of view was validated by last week’s acquisition of Radiology Associates.
The company guided higher in their 4th quarter report, seeing FY2015 earnings per share of $3.32 vs. $2.65 in 2014.
With cost-conscious hospitals becoming increasingly reliant on third party providers like AmSurg, and outpatient procedures becoming increasingly more popular, AMSG has a lot going for it after the Sheridan acquisition. There is ample room for growth in the ambulatory surgical business, which is very fragmented. Although AMSG is the largest player with 243 surgical centers, they have only a 4% market share. Sheridan Healthcare, which represents half of AmSurg’s $2.2 billion in revenue, provides outsourced physician services in areas like radiology and anesthesiology.
Outsourced anesthesiology is deemed to be a $25 billion market and Sheridan has a 3% market share that could easily grow through both organic growth and acquisitions. The radiology market is also fragmented and provides ample room for Amsurg to grow through acquisitions in that market as well. The Affordable Care Act is expected to drive further demand for these types of medial services.
AMSG has a very bullish Chaikin Power Gauge stock rating with strong technicals, in the very strong Medical Care group. The very bullish Power Gauge rating has been driven by strong and consistent earnings growth. Analysts have are becoming increasingly bullish on AMSG.
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Chaikin Analytics stock research
Chaikin Power Gauge stock rating model
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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.
