Amedisys Inc. (AMED - Free Report) reported adjusted earnings from continuing operations of 36 cents per share in the third quarter of 2016, up 5.8% year over year but in line with the Zacks Consensus Estimate.
Excluding adjustments, the company's reported earnings of 34 cents a share were up 36% from a year ago.
Amedisys primarily derives revenues from its home health and hospice agencies. Third-quarter 2016 net service revenues grossed $361.6 million, up 10.7% year over year.The top line is almost in line with the Zacks Consensus Estimate of $362 million.
The Quarter in Detail
Within the company's Home Health division, net service revenues totaled $268.9 million (up 6.1%) in the third quarter. Medicare revenues of $203.9 million improved 7.2% year over year while non-Medicare revenues climbed 2.8% to $65 million.
Same-store Medicare fee for service admissions grew 1% on 3% growth in total episodic admissions.
Within the Hospice division, net service revenues grossed $82.0 million (up 12.3% year over year), including Medicare revenues of $77.0 million (up 12.2%) and non-Medicare revenues of $5.0 million (up 13.6%).
The company reported a 145 basis point (bps) contraction in gross margin to 41.3% in the third quarter while gross profit rose 7%. Expense on salaries and benefits scaled up 10% to $77.0 million. Other expenses also increased 7.8% to $42.6 million. Adjusted operating income of $29.7 million in the reported quarter reflects a decline from the year-ago adjusted operating income of $30.1 million. Operating margin contracted 99 bps to 8.2% from the year-ago figure.
Amedisys exited the third quarter of 2016 with cash and cash equivalents of $8.9 million compared with $9.9 million at the end of the preceding quarter. The company's long-term obligations (excluding current portion) were $88.8 million, marginally down from $89.5 million at the end of the second quarter. Year-to-date net operating cash flow was $6.8 million compared with $30.7 million in the year-ago period.
Amedisys ended the third quarter of 2016 with earnings and revenues meeting estimates. In the Home Health division, the company witnessed strong organic growth in Medicare and non-Medicare revenues. Amedisys currently focuses on three priorities – clinical distinction, driving organic and inorganic growth, realizing operational efficiencies and becoming an employer of choice.
However, the recent proposed rule for Home Health in 2017 by CMS, which includes a shift to a budget neutral plan for reimbursement, may affect growth for the company. Escalation in operating expenses and contraction in margins continue to raise concern.
Zacks Rank & Key Picks
Amedisys currently has a Zacks Rank #4 (Sell). Better-ranked medical stocks are GW Pharmaceuticals plc (GWPH - Free Report) , Baxter International Inc. (BAX - Free Report) and Bovie Medical Corporation . GW Pharmaceuticals and Baxter sport a Zacks Rank #1 (Strong Buy) while Bovie Medical carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
GW Pharmaceuticals surged 71.6% year to date compared to the S&P 500’s 4.3% over the same period. The company has a four-quarter positive average earnings surprise of 41.6%.
Baxter international rallied 26.5% in the past one year, comparing favorably with the S&P 500’s 2.6%. It has a trailing four-quarter average positive earnings surprise of 27%.
Bovie Medical recorded a 153.5% gain in the past one year, way better than the S&P 500’s 2.6%. The company has a trailing four-quarter positive average earnings surprise of 28.7%.
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