Good Numbers for Health Care Providers

Highlighted stocks include Healthsouth (HLS - Analyst Report), Almost Family (AFAM - Snapshot Report), AmSurg (AMSG - Analyst Report), DaVita (DVA - Analyst Report), Emergency Medical Services (EMS - Snapshot Report), Genoptix (GXDX - Snapshot Report) and LHC Group (LHCG - Snapshot Report).

Given all of the headlines on health care reform and now Medicare's looming fiscal crisis, it has been all too easy to overlook some of the positive news that has been coming out of the health care sector.

This is a shame, because several companies in Medical-Outpatient-Home Care delivered good first-quarter results. Though this news may have flown under your radar, brokerage analysts have taken note, as can be seen in the earnings estimate revisions trends. During the past 4 weeks, brokerage analysts have raised full-year forecasts on 22 companies in this group.

Good Revenue and Earnings Growth

This is a case where the numbers clearly speak for themselves, so it's best for me to just show you the first-quarter results.

LHC Group (LHCG - Snapshot Report) earned 62 cents per share, 14 cents better than expectations and 107% higher than a year ago. Revenues rose 49% to $124.6 million. Full-year guidance was raised 15 cents to between $2.15 and $2.25 per share.

Genoptix (GXDX - Snapshot Report) saw earnings reach 33 cents per share, 9 cents above expectations. (Profits were 29 cents a year ago, but the tax rate was more favorable.) Revenues rose to $39.2 million versus $22.3 million (a 75% increase). The company upped its revenue and earnings guidance with profits now expected to total between $1.20 and $1.25 per share, instead of $1.15.

Emergency Medical Services (EMS - Snapshot Report) generated profits of 56 cents, 7 cents above expectations and 41% higher than a year ago. Revenues rose 8.3% to $613 million.

DaVita (DVA - Analyst Report) earned 92 cents per share, topping expectations by 2 cents. Profits improved 15% versus year-ago earnings of 80 cents. Revenues grew just under 8% to $1.5 million. DVA raised its operating income guidance, citing the adoption of an accounting rule.

AmSurg (AMSG - Analyst Report) surprised by a penny with profits of 40 cents per share. Revenues rose 12% to $163.5 million. The company reaffirmed full-year guidance of $1.64 to $1.67 cents per share.

Almost Family (AFAM - Snapshot Report) generated profits of 68 cents per share, 8 cents better than expectations and 54% above year-ago levels. Net services revenues jumped 77% to $69.2 million.

Healthsouth (HLS - Analyst Report) reported adjusted earnings of 39 cents per share, 19 cents better than analysts had expected and more than double Q108 profits. Revenues grew to $475.1 million. HLS expected full-year earnings to be at the high end of its previous guidance for 85-90 cents per share.

Several Factors Contributed to the Growth

A combination of factors led to the good numbers, including:

• Acquisitions
• A milder flu season
• Share repurchase programs

Some companies, however, also enjoyed organic growth. AFAM said that 41% of the improvement in its Visiting Nurse segment was due to true growth (as opposed to growth via acquisitions). GXDX credited its larger sales staff for signing up new customers.

Estimates Raised

Analysts responded to the reports by raising estimates all on the aforementioned companies, as well as several of their peers.

Some of the biggest positive revisions were for HLS (+17 cents to 99 cents per share), LHCG (+15 cents to $2.24 per share) and GXDX (+8 cents to $1.29 per share).

GXDX, HLS and LHCG are Zacks #1 Rank ("strong buy") stocks. AFAM, AMSG, DVA and EMS are Zacks #2 Rank ("buy") stocks.

Related ETFs

There is not a specific ETF that covers these companies.

Dow Jones Industrial U.S. Healthcare Providers (IHF) would be the closest. Health insurers and pharmacy benefit providers account for the largest portions of the fund's portfolio, though DVA is the fund's 10th largest holding, accounting for 3% of the portfolio.

Zacks Premium and Zacks Elite subscribers can view the Zacks Industry Rank List at http://www.zacks.com/zrank/zrank_inds.php. This interactive list allows you to see all of the companies, and their Zacks Rank, within more than 200 industries. Shown below is the Zacks Sector Rank List, which shows the trend in estimate revisions on a broader scale.

Sector Rank as of May 13
Sector	This Week's Zacks Rank	Last Week's Zacks Rank	FY09 Revisions Ratio	FY09 Estimates Revised Up	FY09 Estimates Revised Down
Retail-Wholesale	2.57	2.61	2.92	764	262
Medical	2.81	2.75	1.24	1033	833
Consumer Staples	2.87	2.93	1.31	331	253
Computer and Technology	2.88	2.87	1.21	1522	1256
Auto-Tires-Trucks	2.89	3.04	0.75	85	113
Consumer Discretionary	2.91	2.90	1.26	488	386
Business Services	2.99	3.04	0.81	161	198
Utilities	3.02	3.04	0.76	197	260
Conglomerates	3.04	3.50	0.25	23	93
Basic Materials	3.05	3.10	0.55	229	418
Aerospace	3.08	3.18	0.98	106	108
Oils-Energy	3.20	3.21	0.63	595	952
Finance	3.21	3.19	0.51	962	1877
Construction	3.22	3.20	0.62	121	195
Industrial Products	3.27	3.35	0.53	212	397
Transportation	3.32	3.38	0.42	175	417

Charles Rotblut, CFA, is the senior market analyst for Zacks.com. He can be reached at crotblut@zacks.com.