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Why Is Mednax (MD) Up 18.9% Since Last Earnings Report?

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It has been about a month since the last earnings report for Mednax (MD - Free Report) . Shares have added about 18.9% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Mednax due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

MEDNAX Q3 Earnings In Line With Estimates, Decline Y/Y

MEDNAX’s third-quarter 2019 adjusted earnings of 91 cents per share came in line with the Zacks Consensus Estimate. Meanwhile, the bottom line declined 3.2% % year over year due to high expenses.

Quarterly Details

The company generated revenues of $889 million, surpassing the Zacks Consensus Estimate by 1.8%. However, the top line dipped 0.9% from the year-ago period.

Same-unit revenues inched up 4.2% year over year, mainly driven by higher patient volume.

General and administrative expenses rose 6.9% to $102.4 million due to higher legal, information technology and revenue cycle costs.

Interest expense of the company escalated 37.2% to $29.9 million for the third quarter, primarily due to higher effective interest rate on borrowings between two periods.

In the quarter under review, Adjusted EBITDA totaled $133 million, up 2.3% year over year.

Financial Update

As of Sep 30, 2019, the company had cash and cash equivalents of about $28.9 million, down 36.5% from the level at 2018 end.

The company incurred total debt of $1.9 billion, down 1.8% from the level at 2018 end and total assets of $4.2 billion, down 27.7% from the level at 2018 end.

Cash flows from operating activities were $155.9 million, up 15.3% year over year.

Fourth-Quarter Outlook

For the fourth quarter of 2019, the company expects adjusted EPS in the band of 87-95 cents.

This guidance assumes that total same-unit revenue growth for the three months ended Dec 31, 2019 will be in a 1-3% range from the prior-year period. It also assumes that the effective tax rate for the fourth quarter is 26.5%.

Shares outstanding are predicted to be around 83.4 million.

Adjusted EBITDA from continuing operations is expected between $125 million and $135 million.

2019 Guidance

Based on its third-quarter results, the company now expects adjusted EBITDA for the full year to be around $500 million.
 

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month.

VGM Scores

Currently, Mednax has a strong Growth Score of A, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Mednax has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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