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Why Is Envision Healthcare (EVHC) Down 11.4% Since the Last Earnings Report?

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About a month has gone by since the last earnings report for Envision Healthcare Corporation (EVHC - Free Report) . Shares have lost about 11.4% in that time frame, underperforming the market.

Will the recent negative trend continue leading up to the stock's next earnings release, or is it 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.

Envision Healthcare Q2 Earnings Beat

Envision Healthcare reported second-quarter earnings of 85 cents per share, surpassing the Zacks Consensus Estimate by 3.66%.

The company reported net revenue of $1.95 billion, which missed the Zacks Consensus Estimate by 0.5% but increased from $758.5 million in the year-ago quarter.     

Total operating expenses of $1.75 billion increased from $600 million in the year-ago quarter.

Segment Update

Net revenues from the Physician Services segment were $1.63 billion in the second quarter of 2017, reflecting an increase of 9.3% year over year. The revenue growth was driven by 10.6% contribution from acquisitions and 2.5% from same contracts.

Net revenues from Ambulatory Services were $318.5 million, reflecting a decline of 0.4% year over year. Same-center revenues increased 0.6%, comprising a 0.5% increase in net revenue and a 0.1% increase in procedure volume.

Financial Update

Envision Healthcare had cash and cash equivalents of $441.3 million, up from $316.9 million as of Dec 31, 2016.

Total long-term debt increased to $6.3 billion as of Jun 30, 2017 from $5.8 billion as of Dec 31, 2016.

The company’s ratio of total net debt at Jun 30, 2017 to trailing 12-month EBITDA as calculated under the company’s credit agreement was 4.5 times.

Guidance Update

For 2017, the company lowered its revenue guidance to $7.75–$8.00 billion (from the previous guidance of $7.80 billion to $8.05 billion), adjusted EBIDTA to $1.02 billion to $1.04 billion (from $1.038 billion to $1.066 billion) and adjusted EPS to $3.35 to $3.45 (from $3.38 to $3.52).

It, however, kept intact, the same contract revenue growth guidance of 3% to 4% in the physician services segment and 0% to 1% in ambulatory services.

For the third quarter, the company expects adjusted EBIDTA of $266 million to $278 million and adjusted EPS of 87 cents to 93 cents. 

How Have Estimates Been Moving Since Then?

Following the release, investors have witnessed a downward trend in fresh estimates. There have been six revisions lower for the current quarter. In the past month, the consensus estimate has shifted downward by 6.9% due to these changes.

VGM Scores

At this time, the stock has an average Growth Score of C, though it is lagging a lot on the momentum front with an F. However, the stock was allocated a grade of B on the value side, putting it in the second quintile 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.

Our style scores indicate that the stock is more suitable for value investors than growth investors.

Outlook

Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. Notably, the stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.




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