It has been about a month since the last earnings report for Mednax (MD - Free Report) . Shares have added about 4.1% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Mednax 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 catalysts.
Mednax’s Q3 Earnings Miss, Up Y/Y
MEDNAX’s third-quarter 2018 adjusted earnings of 94 cents per share missed the Zacks Consensus Estimate of 96 cents. However, the bottom line improved nearly 8% year over year, primarily backed by the company’s operational efficiency and its various growth initiatives.
The company generated revenues of $897 million, falling shy of the Zacks Consensus Estimate of $907 million by 1.1%, mainly due to lower neonatology patient volumes. However, the top line was up 3.2% from the year-ago period. Same unit revenues inched up 0.6% year over year, mainly driven by volume growth across all service lines. However, the upside was offset by a decline in patient volumes in neonatology services.
General and administrative expenses rose 1.5% to $102.9 million.
Interest expense of the company escalated 18.5% to $21.8 million for the third quarter, primarily due to higher effective interest rate on borrowings between two periods as well as higher outstanding borrowings.
In the quarter under review, EBITDA totaled $140.9 million, down by nearly 7% as a result of higher same-unit revenue growth, loss of contribution from non-renewal of a contract along with salaries and benefits costs.
The company closed three private physician practice acquisitions in the reported quarter.
As of Sep 30, 2018, the company had cash and cash equivalents of about $34 million, down 42.8% from year end 2017.
The company incurred total debt of $2 billion, up 8.3% from 2017-end level and total assets of $5.8 billion, down 0.5% from 2017-end level.
Cash flows from operating activities were $140.7 million, down 29.6% year over year.
Share Repurchase Update
MEDNAX deployed $250 million of cash to buy back common stock under its current $500 million share repurchase authorization.
For the fourth quarter, the company expects its earnings per share in the range of 65-73 cents, down from the earlier projection of 72-77 cents and adjusted EPS within 87-95 cents. The guidance for adjusted EPS band excludes amortization costs and stock-based compensation expense.
EBITDA is anticipated between $130 million and $140 million for the fourth quarter compared with the prior-year period’s tally of $154.6 million.
The company also assumes the effective tax rate for the ongoing quarter to be 27% and average outstanding shares to be 27 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -10.77% due to these changes.
Currently, Mednax has a subpar Growth Score of D, a grade with the same score on the momentum front. However, the stock was allocated a grade of A on the value side, putting it in the top 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.
Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, Mednax has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.