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Can Revenue Rise Aid Envision Healthcare (EVHC) Q4 Earnings?

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Envision Healthcare Corp. is expected to report fourth-quarter 2017 and full-year results on Feb 27, 2018. The company anticipates an increase in revenues from the company's Physician Services segment (contributing nearly 84% of the company’s revenues), driven by synergy from recent acquisitions as well as organic growth.

Revenue growth in the segment is likely to come from higher patient volumes as well as improved pricing. We also anticipate an improved EBIDTA, possibly benefiting from merger-related synergies. The Zacks Consensus Estimate for this segmental revenues is pegged at $1.65 billion compared with $865.8 million reported a year ago.

The company’s Ambulatory service segment will likely report decline in revenues due to disposal of centers. The Zacks Consensus Estimate for revenues from this segment stands at $324 million, down from $326.7 million reported in the year-ago quarter.

Moreover, the company is reeling under escalating operating expenses for several quarters on higher salaries and benefits expenses. Most alarming is the rate at which the metric rose, which has overshadowed the revenue growth rate, thwarting the company’s bottom-line growth in turn. The same is forecast in the to-be-reported quarter.

A huge debt load is also affecting Envision Healthcare. Its total debt burden has been swelling since 2013, leading to a spike in interest expense. This in turn might also dent the company’s operating margins.

Company's Preliminary Results

Earlier this February 2018, the company came up with preliminary fourth-quarter 2017 and full-year numbers. Envision Healthcare projects net revenues from continuing operations at approximately $2.0 billion and adjusted EBITDA at or slightly above the high end of its guided range of $182-$202 million.

Earnings Surprise History

The company has a mixed earnings history. It missed estimates in two of the trailing four quarters with an average negative surprise of 5.2%.

Envision Healthcare Corporation Price and EPS Surprise


Why a Likely Positive Surprise?

Our proven model shows that Envision Healthcare is likely to beat on earnings because it has the right combination of the following two important ingredients:

Zacks ESP: Envision Healthcare has an Earnings ESP of +2.51%. This is because the company’s Most Accurate estimate is pegged at 51 cents while the Zacks Consensus Estimate stands lower at 50 cents. A favorable ESP indicates a likely positive surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Envision Healthcare carries a Zacks Rank #3 (Hold). Notably, stocks with a solid Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 have a significantly higher chance of beating estimates.

Conversely, Sell-rated stocks (#4 or 5) should never be considered going into an earnings announcement, especially when the company is witnessing negative estimate revisions.

Other Stocks With Favorable Combination

Here are some other companies worth considering from the health care sector with the right combination of elements to deliver an earnings beat:

Teladoc Inc. (TDOC - Free Report) has an Earnings ESP of +28.98% and a Zacks Rank of 3. The company will report fourth-quarter earnings on Feb 27.  You can see the complete list of today’s Zacks #1 Rank stocks here.

Health Insurance Innovations, Inc. (HIIQ - Free Report) has an Earnings ESP of +3.80% and a Zacks Rank #2. The company will release fourth-quarter earnings on Feb 28.

Community Health Systems, Inc. (CYH - Free Report) has an Earnings ESP of +2.94% and is a Zacks #3 Ranked player. The company will announce fourth-quarter earnings on Feb 27.

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