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Analyst Blog

We recently reiterated our Neutral recommendation on AmSurg Corporation (AMSG - Analyst Report), a major operator of single-specialty practice-based ambulatory surgery centers (ASCs). While we hold a favorable view regarding the company’s double-digit sales growth in the past several quarters on the back of new centers and improved same-center sales, concerns linger around challenges like reimbursement issues and economic uncertainty. The stock currently carries a Zacks Rank #3 (Hold).

Why at Neutral?

AmSurg’s fourth-quarter earnings per share (EPS) of 49 cents were up 6.5% year over year. Although it missed the Zacks Consensus Estimate of 2 cents, EPS remained within the company’s guidance range. Revenues increased 10% to $244.2 million.

AmSurg has been able to deliver satisfactory progress with several quarters of double-digit sales growth. In spite of the impact of Hurricane Sandy, fourth-quarter 2012 revenues were encouraging due to an increase in the number of multi-specialty centers, addition of several new centers through acquisitions and the development of additional ASCs. We are also encouraged to note that during the quarter, improved volume-pricing mix led to a 3% increase in same-store revenue, which was preceded by 2% growth in the third quarter.This was the 7th consecutive quarter of increase.

Moreover, we expect AmSurg to go ahead with its acquisition pipeline, supported by a strong cash position.Government agencies have undertaken initiatives to curtail healthcare expenditure, resulting in a shifttoward ASCs from admission to traditional hospitals.

However, AmSurg is encountering several challenges such as reimbursement issues and economic uncertainty. All of these collectively result in deferring elective procedures, with a decline in doctor visits by patients, which leads to lower surgical volume.

Other Stocks to Consider

While we prefer to remain on the sidelines on Thermo Fisher, other medical device stocks worth a look are Given Imaging , Medical Action Industries Inc. and Cytokinetics Incorporated (CYTK - Snapshot Report). All these stocks carry a Zacks Rank #1 (Strong Buy).

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