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Why You Should Avoid Envision Healthcare (EVHC) Stock Now
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Market sentiments have lately been weak for Envision Healthcare Corporation , especially with the 2017 earnings guidance cut in the first-quarter earnings release.
Since the results were reported on May 2, shares of this Zacks Rank #4 (Sell) company have underperformed the Zacks categorized Medical Outpatient and Home Healthcare industry. While Envision Healthcare has lost 0.98%, the industry has registered an increase of 0.10%.
What’s Hurting the Stock?
Investors’ pessimism about Envision Healthcare has stemmed from the decline in 2017 earnings guidance, following first-quarter results. The company now expects adjusted EBITDA from continuing operations of $1.038 billion to $1.066 billion, down from the original guidance of $1.365 billion to $1.415 billion. Its top-line guidance of $7.80 billion to $8.05 billion was also pulled down from the earlier projection of $10.41 billion to $10.71 billion. The decline in revenues will likely be due to lower revenues expected from its Ambulatory Services segment, which recently experienced soft business volumes.
The stock has also witnessed estimates moving south over the last 60 days. The Zacks Consensus Estimate has decreased 18.8% to $3.13 for 2017 and 19.6% to $3.67 for 2018.
Envision Healthcare’s earnings surprise history is also not impressive. The company missed earnings estimates in two of the last four quarters, with an average negative surprise of 2.27%.
Moreover, the company is reeling under escalating operating expenses for several years. Most alarming is the rate of increase of operating expense which has surpassed the revenue growth rate, thereby thwarting bottom-line growth.
A huge debt load is also niggling Envision Healthcare. Its total debt has been swelling since 2013, leading to a spike in interest expense. The company’s debt is about 4.3 times EBITDA, which is above the 3 to 4 times EBITDA that the company feels comfortable at.
Key Picks
While Envision Healthcare doesn’t seem to be a good bet at present, investors may consider better-ranked stocks such as LHC Group, Inc. , Pharmerica Corporation and Quest Diagnostics Inc. (DGX - Free Report) . All three carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
LHC Group beat estimates in three of the last four quarters, with an average positive surprise of 4.8%.
Pharmerica Corporation beat estimates in two of the trailing four quarters, with an average positive surprise of 1.25%.
Quest Diagnostics beat estimates in each of the last four quarters, with an average positive surprise of 5.15%.
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At Zacks, we're mostly focused on short-term profit cycles, but the hottest of all technology mega-trends is starting to take hold...
By last year, it was already generating $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce ""the world's first trillionaires,"" but that should still leave plenty of money for those who make the right trades early. See Zacks' Top 3 Stocks to Ride This Space >>
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Why You Should Avoid Envision Healthcare (EVHC) Stock Now
Market sentiments have lately been weak for Envision Healthcare Corporation , especially with the 2017 earnings guidance cut in the first-quarter earnings release.
Since the results were reported on May 2, shares of this Zacks Rank #4 (Sell) company have underperformed the Zacks categorized Medical Outpatient and Home Healthcare industry. While Envision Healthcare has lost 0.98%, the industry has registered an increase of 0.10%.
What’s Hurting the Stock?
Investors’ pessimism about Envision Healthcare has stemmed from the decline in 2017 earnings guidance, following first-quarter results. The company now expects adjusted EBITDA from continuing operations of $1.038 billion to $1.066 billion, down from the original guidance of $1.365 billion to $1.415 billion. Its top-line guidance of $7.80 billion to $8.05 billion was also pulled down from the earlier projection of $10.41 billion to $10.71 billion. The decline in revenues will likely be due to lower revenues expected from its Ambulatory Services segment, which recently experienced soft business volumes.
The stock has also witnessed estimates moving south over the last 60 days. The Zacks Consensus Estimate has decreased 18.8% to $3.13 for 2017 and 19.6% to $3.67 for 2018.
Envision Healthcare’s earnings surprise history is also not impressive. The company missed earnings estimates in two of the last four quarters, with an average negative surprise of 2.27%.
Moreover, the company is reeling under escalating operating expenses for several years. Most alarming is the rate of increase of operating expense which has surpassed the revenue growth rate, thereby thwarting bottom-line growth.
A huge debt load is also niggling Envision Healthcare. Its total debt has been swelling since 2013, leading to a spike in interest expense. The company’s debt is about 4.3 times EBITDA, which is above the 3 to 4 times EBITDA that the company feels comfortable at.
Key Picks
While Envision Healthcare doesn’t seem to be a good bet at present, investors may consider better-ranked stocks such as LHC Group, Inc. , Pharmerica Corporation and Quest Diagnostics Inc. (DGX - Free Report) . All three carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
LHC Group beat estimates in three of the last four quarters, with an average positive surprise of 4.8%.
Pharmerica Corporation beat estimates in two of the trailing four quarters, with an average positive surprise of 1.25%.
Quest Diagnostics beat estimates in each of the last four quarters, with an average positive surprise of 5.15%.
3 Stocks to Ride a 588% Revenue Explosion
At Zacks, we're mostly focused on short-term profit cycles, but the hottest of all technology mega-trends is starting to take hold...
By last year, it was already generating $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce ""the world's first trillionaires,"" but that should still leave plenty of money for those who make the right trades early. See Zacks' Top 3 Stocks to Ride This Space >>