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Envision Healthcare (EVHC) Up 15.5% Since Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for Envision Healthcare Corporation (EVHC - Free Report) . Shares have added about 15.5% in that time frame.

Will the recent positive trend continue leading up to its next earnings release, or is EVHC due for a pullback? 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 Q1 Earnings Beat, Revenues Rise

Envision Healthcare Corp.  reported first-quarter earnings of 65 cents per share that beat the Zacks Consensus Estimate by 14%. Earnings were, however, down 5.8% year over year.

Better-than-expected earnings were driven by revenue growth at the company’s Physicians Services segment.

Adjusted EBITDA for the first quarter came at $207.6 million, down 1.3% year over year.

The company reported net revenues of $2.08 billion, which beat the Zacks Consensus Estimate by 2.8% and improved 10.7% year over year.

Total operating expenses of $1.92 billion increased 11.4% year over year, due to higher salaries and benefits and operating cost.

Mixed Segment Performance

Physician Services

Net revenues from the segment were $1.77 billion, reflecting an increase of 13.2% year over year. The revenue growth was driven by 8.2% contribution from acquisitions and 2.7% from same contracts and 2.3% from new contracts.

Adjusted EBITDA was $150.1 million, unchanged year over year.

Ambulatory Services

Net revenues were $307.6 million, down 2.6% year over year, led by weather- and flu-related procedure cancellations.

For the reported quarter, adjusted EBITDA was $57.5 million, down 4.5% year over year.

Financial Update

Envision Healthcare had cash and cash equivalents of $767.4 million, down 1.4% year over year.

At Mar 31, 2018, Envision had total debt outstanding of $4.7 billion. The company’s ratio of total net debt to EBIDTA ratio was 4.2 times at the end of first-quarter 2018.

Net cash provided by operating activities was $37.3 million as of Mar 31, 2018, down from $98.1 million as of Mar 31, 2017.

Second-Quarter 2018 Guidance

The company expects adjusted EPS within the range of 83 cents and 90 cents and adjusted EBITDA in the band of $234-$246 million.

Full-Year 2018 Guidance

The company affirmed its previously provided revenue guidance for 2018, which calls for net revenues in the range of $8.35 billion to $8.53 billion. It, however, pulled up the lower end of the guidance for adjusted EBIDTA and adjusted EPS.

The company expects adjusted EBIDTA of $965 million to $1 billion (versus $960 million to $1 billion) and adjusted EPS between $3.49 and $3.70 (versus $3.46 and $3.70).

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. There has been one revision higher for the current quarter compared to six lower.

VGM Scores

At this time, EVHC has a poor Growth Score of F. Its Momentum is doing a lot better with an A. 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 C. 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 momentum investors than value investors.

Outlook

Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. Interestingly, EVHC has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.




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