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Amsurg Misses Q2 Earnings, Revenues, Shares Dip Marginally

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Tennessee-based healthcare provider Amsurg Corp. reported adjusted earnings per share (EPS) of 63 cents from continuing operations, reflecting an 8.6% rise from the year-ago figure of 58 cents. 
However, the adjusted EPS figure missed the Zacks Consensus Estimate by a penny although it was within the company’s second-quarter guidance range of 61−64 cents. Solid revenue growth in the second quarter primarily contributed to the year-over-year earnings improvement.
Including one-time items, the company’s reported second-quarter 2014 net earnings per share from continuing operations was 59 cents, up 1.7% year over year.
Following the earnings release, the company’s share price dropped 0.8% to close at $47.36 on Friday.


Quarter in Details
Revenues in the quarter scaled up 5.2% year over year to $281.1 million, but fell short of the Zacks Consensus Estimate of $283.0 million. According to Amsurg, the top-line growth came largely on the back of average revenues per procedure, which increased 4% on a comparable-quarter basis on the back of modified procedure mix.
Same-center revenues rose 1% year over year, despite having one less business day in the quarter compared with the same period last year. AmSurg exited the second quarter with a total of 243 operational centers.
Operating expenses increased 7.2% year over year to $186.5 million due to higher salaries and benefits (up 4.7% to $84.9 million), supply cost (up 5.9% to $41.3 million) and other operating expenses (up 11.9% to $60.3 million). Moreover, on the back of increased expenses, adjusted operating margin contracted 80 basis points to 34.3% in the quarter.
AmSurg exited the reported quarter with $44.9 million in cash and cash equivalents versus $50.8 million at the end of 2013, and had $300 million available borrowing capacity under its revolving credit facility. For the second quarter, net cash flow from operating activities was $83.8 million, up 6.5% from the year-ago quarter.
Outlook Revised
AmSurg has updated its 2014 operating and financial guidance, primarily to take into account the impact of the Sheridan transaction. The company now expects revenues in the range of $1.61−$1.63 billion (earlier guidance: $1.12−$1.13 billion). The current Zacks Consensus Estimate of $1.64 billion exceeds the guidance range. AmSurg also upgraded its full-year adjusted EPS outlook to $2.61−$2.66 (earlier $2.41−$2.45). The current Zacks Consensus Estimate of $2.64 lies within the company-guided range.
Further, the company’s 2014 same-center revenue growth is projected at 1%–2% (unchanged). Moreover, the company now expects 6%–8% organic revenue growth in physician services in 2014. Expected net cash flow from operating activities, less distribution to non-controlling interests, has been upgraded to the range of $170–$180 million (earlier: $150−$160 million). 
Additionally, AmSurg provided its EPS guidance for the third quarter of 2014. The company expects EPS in the range of 63−65 cents. The current Zacks Consensus Estimate of 62 cents for the third-quarter earnings falls below the guided range.
Our Take
Yet again, AmSurg delivered disappointing second-quarter 2014 results missing the Zacks Consensus Estimate on both fronts. However, we are positive on the company’s new joint ventures and expect it to progress well on its acquisition pipeline, supported by a strong cash position. Moreover, the company has upgraded its 2014 outlook which indicates some near-term catalyst that will aid its financials further in the near future.
Moreover, we are optimistic about the fact that government agencies have undertaken initiatives to curtail healthcare expenditure, thereby resulting in a shift toward ambulatory surgery centers from admission to traditional hospitals. This in turn should benefit healthcare providers like Amsurg.
Currently, AmSurg retains a Zacks Rank #2 (Buy). Some other well-placed Medical-Outpatient/Home Care stocks include Amedisys Inc. (AMED - Free Report) , Chemed Corp. (CHE - Free Report) and HEALTHSOUTH Corp. . All these stocks hold a Zacks Rank #1 (Strong Buy).

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