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Why Pediatrix Medical (MD) is a Solid Bet for Your Portfolio

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Pediatrix Medical Group, Inc. (MD - Free Report) is well-poised to grow on the back of a strong inorganic growth profile and solid segmental performances. Its strategy to improve brand awareness is expected to help boost profits.

Pediatrix Medical — with a market cap of $1.9 billion — provides newborn, maternal-fetal, radiology, pediatric cardiology and other pediatric subspecialties physician services in the United States and Puerto Rico.

Courtesy of solid prospects, this currently Zacks Rank #1 (Strong Buy) stock is worth adding to your portfolio at the moment.

Rising Estimates

The Zacks Consensus Estimate for Pediatrix Medical’s 2022 earnings is pegged at $1.93 per share, indicating an 18.4% increase from the 2021 level. In the past 60 days, MD has witnessed four upward estimate revisions against none in the opposite direction. MD beat on earnings in each of the last four quarters, the average being 18.5%.

MEDNAX, Inc. Price and EPS Surprise

MEDNAX, Inc. Price and EPS Surprise

MEDNAX, Inc. price-eps-surprise | MEDNAX, Inc. Quote

The consensus estimate for 2022 revenues stands at $2 billion, suggesting a 5.3% rise from the prior-year reported figure. MD expects adjusted EBITDA at a minimum of $270 million for 2022, suggesting 1.7% growth from the 2021 figure. For the fiscal second quarter, MD projects adjusted EBITDA to match or remain modestly higher than the prior-year figure of $66 million. Growth of the metric is expected to ramp up in second-half 2022.

Key Drivers

Pediatrix Medical changed its corporate name from Mednax, effective Jul 1, 2022, to improve brand awareness and is expected to highlight its exclusive focus on providing specialized services for women, babies and children. MD earlier highlighted that unifying its certain operations under the Pediatrix brand is expected to collectively promote its wide range of healthcare services, which were difficult earlier due to different brand names.

MD is expected to boost its services across maternal-fetal medicine, neonatology and obstetrics, and 18 pediatric subspecialty offerings. Rising patient volumes have been boosting Pediatrix Medical’s profit levels for the past few quarters, and this latest brand evolution will likely drive volumes in the coming days.

MD is also focused on expanding its telehealth services to ensure access to healthcare even when staying at home. Given the easy access, we expect this business line to continue performing well going forward besides boosting profits.

Pediatrix Medical’s string of acquisitions boosts its footprint and service offerings across different markets. In February 2022, MD bought Night Lite Pediatrics in Orlando, FL, a private 13-clinic pediatric urgent care practice. MD has a solid pipeline of activities coming up. After the buyout of NightLight in Houston, TX, MD is now planning to open clinics outside NightLight's hometown.

MD’s focus on improving operating efficiency will keep boosting its profit levels. Management doesn't shy away from divesting non-core assets, which are low on profitability. Some of the major divestments over the years have been MedData, American Anesthesiology and MEDNAX Radiology Solutions. These moves help Pediatrix Medical focus on its core business, lower its risk profile and help reduce its debt burden.

Over the past month, Pediatrix Medical’s shares have jumped 7.8% against the industry’s fall of 13% and the S&P 500 Index’s decline of 7.1%, and there’s more room to run.

Risks

However, there are a few factors that might hinder the stock’s growth.

Declining free cash flows can be concerning. Pediatrix Medical’s free cash flow in the trailing 12-month period declined 19.3% to $56 million. Also, its soft return on equity compared with the industry can make it an unattractive bet for investors. Nevertheless, we believe that a systematic and strategic plan of action augurs well for the long run.

Other Key Picks

Some other top-ranked stocks in the broader medical space are Assertio Holdings, Inc. (ASRT - Free Report) , Acadia Healthcare Company, Inc. (ACHC - Free Report) and Altimmune, Inc. (ALT - Free Report) . While Assertio sports a Zacks Rank #1, Acadia Healthcare and Altimmune carry a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Assertio’s second-quarter earnings indicates a 125% improvement from the year-ago quarter’s reported figure. ASRT’s earnings beat estimates twice in the last four quarters and missed the same on the other two occasions, the average surprise being 26.4%.

The Zacks Consensus Estimate for Acadia Healthcare’s 2022 bottom line indicates a 19.1% improvement from the 2021 level. ACHC has witnessed five upward estimate revisions in the past 60 days against one in the opposite direction. ACHC’s earnings beat estimates twice in the last four quarters, met the same once and missed the mark on another occasion, the average surprise being 4.4%.

The Zacks Consensus Estimate for Altimmune’s 2022 bottom line indicates an 8.2% improvement from the 2021 level. ALT has witnessed four upward estimate revisions in the past 60 days against none in the opposite direction. ALT’s earnings beat estimates in three of the last four quarters and missed the mark on the remaining occasion.