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Mednax (MD) Up 60.5% Since Last Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for Mednax (MD - Free Report) . Shares have added about 60.5% 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 its most recent earnings report in order to get a better handle on the important drivers.

MEDNAX's Q3 Earnings Meet Estimates, Revenues Miss

MEDNAX reported third-quarter 2020 adjusted earnings of 33 cents per share, which matched the Zacks Consensus Estimate. However, the bottom line plunged 60.7% year over year due to soft revenues.

The COVID-19 pandemic continued to adversely affect the company’s patient volumes and revenues, which in turn, has acted as a drag on its third-quarter results.

Quarterly Details

The company generated revenues of $461 million, which missed the Zacks Consensus Estimate by 13.9%. The top line plunged also slumped 48.1% from the year-ago period. This was due to dented patient volumes stemming from the pandemic.

Same unit revenues inched down 0.4% year over year. Nevertheless, the decline was partially offset by growth stemming from the company’s recent buyouts.

General and administrative expenses increased 4.7% year over year to $66.3 million due to rise in general and administrative expenses.

Total operating expenses increased 8.3% year over year to $440.2 million due to higher practice salaries and benefits, general and administrative expenses, depreciation and amortization, transformational and restructuring related expenses.

Interest expense of the company declined 8.7% to $27.3 million due to lower borrowings

In the quarter under review, adjusted EBITDA totaled $72.7 million, up 4.9% year over year.

Financial Update

As of Sep 30, 2020, the company had cash and cash equivalents of $294.5 million, which increased nearly three-fold from the level as of Dec 31, 2019.
The company’s total debt, net of $1.7 billion inched up 0.8% from the level at 2019 end, while total assets worth $3.4 billion were down 17.4% from last-year end.

Cash flow generated from operating activities was $127.1 million in the quarter under review, which increased more than two-fold year over year.

Business Update

The company has inked a deal this September to divest MEDNAX Radiology Solutions and intensify focus on Pediatrix and Obstetrix medical groups. It aims to channelize its resources as a pediatrics and obstetrics organization.
 

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month. The consensus estimate has shifted -27.19% due to these changes.

VGM Scores

Currently, Mednax has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. However, the stock was allocated a grade of A on the value side, putting it in the top 20% 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. It's no surprise Mednax has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.


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