Envision Healthcare Corp. , expected to report first-quarter 2018 results on May 7, should see an increase in revenues from its Physician Services segment (which contributes nearly 84% of the company’s revenues), driven by synergies from recent acquisitions, same-contract revenue growth as well new contract growth.
Revenue growth in the segment is expected to come from higher patient volumes, due to the acute flu season in the first quarter. The Zacks Consensus Estimate for revenues from this segment is $1.70 billion, up 9% year over year.
The company’s Ambulatory service segment will likely report revenue growth from higher procedure volume growth. The Zacks Consensus Estimate for revenues from this segment is $319 million, up 1% year over year.
During the quarter, the company completed the divestiture of its medical transportation business, American Medical Response, for net proceeds of $2.1 billion. The company intends to use these funds to reduce debt. We thus expect to see a lower leverage ratio in the first quarter.
Envision Healthcare has also undertaken operational improvement initiatives. Via revenue cycle management, clinical labor management and operational efficiencies, the company has plans to realize $50 million of incremental adjusted EBIDTA in 2018. Part of this benefit will be seen in the first quarter.
Like most companies, the company’s adjusted EPS was influenced by the Tax Cuts and Jobs Act. Since the company carries deferred income tax liabilities, the new tax law had a positive impact on its adjusted EPS in the previous quarter, and we expect the same to see in the first quarter, which should aid its margins.
Guidance for Q1
For the first quarter of 2018, the company expects adjusted EBITDA from continuing operations between $195 million and $205 million, and adjusted EPS of 61 cents to 67 cents.
Earnings Surprise History
The company has an attractive earnings surprise history, having surpassed estimates in two of the trailing four quarters, with an average negative surprise of 1.15%. This is depicted in the chart below:
Envision Healthcare Corporation Price and EPS Surprise
Why a Likely Positive Surprise?
Our proven model indicates that chances of Envision Healthcare beating the Zacks Consensus Estimate is high as it has the right combination of the two key ingredients — positive Earnings ESP and a Zacks Rank #3 (Hold) or better. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks ESP: The Earnings ESP for Envision Healthcare is +0.52%.
Zacks Rank: Envision Healthcare has a Zacks Rank #3, which increases the predictive power of ESP.
Other Stocks to Consider
Here are some other companies that you may consider as our model shows that these too have the right combination of elements to post an earnings beat this quarter:
Addus HomeCare Corp. (ADUS - Free Report) is expected to report earnings results for the first quarter on May 7. The company has an Earnings ESP of +11.39% and a Zacks Rank #3. It surpassed earnings estimates in two of the last four quarters, with an average positive surprise of 1.81%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here
Adverum Biotechnologies, Inc. (ADVM - Free Report) is expected to report earnings results for the first quarter on May 8. The company has an Earnings ESP of +6.9% and a Zacks Rank #3. The company surpassed earnings estimates in two of the last four quarters.
Array BioPharma Inc. is expected to report third-quarter fiscal 2018 earnings results on May 9. The company has an Earnings ESP of +25.83% and a Zacks Rank #2 (Buy). It beat earnings estimates in two of the last four quarters, with an average positive surprise of 3.5%.
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