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Amedisys (AMED) Down 6.5% Since Last Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for Amedisys (AMED - Free Report) . Shares have lost about 6.5% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Amedisys due for a breakout? 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.

Amedisys Q2 Earnings Beat Estimates, Revenues Miss

Amedisys reported adjusted earnings per share of $1.69 for second-quarter 2021, up 26.1% from the year-ago figure. The bottom line beat the Zacks Consensus Estimate by 3.1%.

The quarter’s adjustments include depreciation and amortization costs, certain COVID-related costs as well as benefits from CARES Act & State COVID-19 grants.

GAAP EPS for the second quarter was $2.43, up 133.7% compared with the year-ago $1.04.

Net service revenues grossed $564.2 million, up 16.3% year over year. The top line missed the Zacks Consensus Estimate by 0.1%.

Segment in Detail

Within the Home Health division, net service revenues totaled $349.3 million in the quarter, reflecting a 20.4% rise year over year. Within this segment, Medicare revenues of $234.8 million improved 21.7% year over year. Non-Medicare revenues increased 17.7% to $114.5 million.

Within the Hospice division, net service revenues were $197.9 million (up 11.7% year over year), including Medicare revenues of $186.9 million (up 11.9%) and non-Medicare revenues of $11 million (up 8.9%).

At Personal Care, net service revenues totaled $17 million, reflecting a decline of 3.9% from the year-ago number. The Corporate segment did not register any revenue in the second quarter.

Margins

Gross profit for the company improved 34.6% to $255.5 million in the quarter under review. Gross margin expanded 615 basis points (bps) to 45.3%.

Expenses on salaries and benefits rose 8.3% to $114.3 million. Other expenses rose 24.4% to $54.7 million. Adjusted operating profit of $86.4 million reflected a 114.9% improvement from the year-ago quarter.

Adjusted operating margin expanded 703 bps to 15.3% from the prior-year level.

Liquidity and Cash Position

Amedisys exited the second quarter of 2021 with cash and cash equivalents of $91.7 million compared with $77.3 million at the end of first-quarter 2021. The company's long-term obligations (excluding the current portion) were $179.4 million at the end of the second quarter compared with $231.4 million at the end of the last reported quarter.

Cumulative net cash provided by operating activities at the end of the second quarter was $67.9 million compared with $133.9 million at the end of second-quarter 2020.

Contessa Acquisition Update

The company closed the earlier-announced acquisition deal of Contessa Health, a Nashville, TN-based company that offers higher-acuity hospital-at-home and skilled nursing facility (SNF)-at-home services. With the completion of the deal, Contessa’s risk-based model and claims analytics capabilities will get integrated into Amedisys’ business, enabling the company to become a risk-bearing, home-based care delivery organization. Contessa will operate as a wholly-owned division of Amedisys and will be reported as a separate operating segment in the company’s future filings.

2021 Guidance

For 2021, the company anticipates net service revenues in the range of $2.230 billion to $2.245 billion compared with the earlier guidance of $2.302-$2.342 billion. Adjusted earnings per share are projected in the range of $6.37-$6.49 compared with the prior guidance of $6.85-$7.07.
Amedisys also updated its 2021 guidance, including all acquisition activity closed as of Aug 4, 2021.

For 2021, the company anticipates net service revenues in the range of $2.241 billion to $2.259 billion and adjusted earnings per share are projected in the band of $6.03-$6.18.

The Zacks Consensus Estimate for 2021 revenues is pegged at $2.32 billion. The Zacks Consensus Estimate for adjusted earnings per share is pegged at $6.94.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision. The consensus estimate has shifted -25.01% due to these changes.

VGM Scores

At this time, Amedisys has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. 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 Amedisys has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.


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