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Amedisys (AMED) Q2 Earnings Top Estimates, Gross Margin Dips

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Amedisys, Inc. (AMED - Free Report) reported earnings per share (EPS) of $1 in the second quarter of 2018, up 61.2% from the year-ago adjusted EPS of 62 cents. The bottom line also remained well ahead of the Zacks Consensus Estimate of 78 cents.

Second-quarter net service revenues grossed $411.6 million, up 9.8% year over year. Moreover, the top line also beat the Zacks Consensus Estimate of $404 million.

Quarter in Detail

Within the company's Home Health division, net service revenues totaled $291.5 million in the second quarter, reflecting a 7.8% improvement year over year. Medicare revenues of $206.3 million rose 4% year over year while non-Medicare revenues improved 18.3% year over year to $72 million.

Within the Hospice division, net service revenues grossed $101.4 million (up 12.3% year over year) including Medicare revenues of $96.9 million (up 12.9%) and non-Medicare revenues of $4.5 million (flat year over year).

Amedisys, Inc. Price, Consensus and EPS Surprise

Amedisys, Inc. Price, Consensus and EPS Surprise | Amedisys, Inc. Quote

Recently, the company integrated two additional operating segments within its business, namely Personal Care and Corporate. At Personal Care, net service revenues totaled $18.7 million, representing a 30.8% surge from the year-ago number. Meanwhile, the Corporate segment did not register any revenues till the end of the second quarter.

The company’s gross margin contracted 11 basis points (bps) to 41.1% in the quarter under review despite a 9.5% gain in gross profit. Expense on salaries and benefits rose 3% to $77.2 million. Other expenses inched up 1.2% to $42.1 million. Adjusted operating income of $49.7 million in the reported quarter reflects a 31.4% rise from the year-ago tally. Adjusted operating margin expanded 199 bps to 12.1% from the year-ago figure.

Amedisys exited the second quarter of 2018 with cash and cash equivalents of $25.9 million compared with $120 million at the end of the first quarter. The company's long-term obligations (excluding current portion) were $123.9 million at the end of the second quarter compared with $75.8 million at the end of the first quarter. Net cash provided by operating activities in the first half of 2018 was $50.7 million compared with $36.2 million in the year-ago period.

Our Take

Amedisys ended the second quarter on a promising note with both earnings and revenues exceeding the respective Zacks Consensus Estimate. At the Home Health and Hospice divisions, the company witnessed encouraging growth in Medicare and non-Medicare revenues. Amedisys is currently exploring opportunities in these segments. We are also impressed by the company’s solid performance in the recently launched Personal Care segment.  A favorable demographic trend and strategic acquisitions also bode well for the company.

However, escalating operating expenses and a declining gross margin continue to raise concerns. Also, an intense competitive landscape and regulatory concerns persistently pose challenges to the home health and hospice industry.

Zacks Rank & Key Picks

Amedisys sports a Zacks Rank #1 (Strong Buy). A few other top-ranked stocks in the broader medical sector having reported solid results this earnings season so far are Intuitive Surgical (ISRG - Free Report) , Chemed Corporation (CHE - Free Report) and Align Technology, Inc. (ALGN - Free Report) . While Intuitive Surgical sports a Zacks Rank of 1, Chemed and Align Technology carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Intuitive Surgical reported second-quarter 2018 adjusted EPS of $2.76, which beat the Zacks Consensus Estimate of $2.48. Revenues totaled $909.3 million, also surpassing the consensus estimate of $870 million.

Chemed reported second-quarter 2018 adjusted EPS of $2.81, which trumped the Zacks Consensus Estimate of $2.68. Revenues of $441.8 million edged past the Zacks Consensus Estimate of $432.3 million.

Align Technology posted second-quarter 2018 adjusted EPS of $1.30, steering past the Zacks Consensus Estimate of $1.09. Revenues came in at $490.3 million, beating the consensus estimate of $462.9 million.

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