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Why Is Mednax (MD) Down 17.6% Since Last Earnings Report?

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A month has gone by since the last earnings report for Mednax (MD - Free Report) . Shares have lost about 17.6% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Mednax due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

MEDNAX Q4 Earnings Surpass Estimates, Increase Y/Y

MEDNAX delivered fourth-quarter 2018 adjusted earnings of 92 cents per share, beating the Zacks Consensus Estimate by 10.8%. Moreover, the bottom line improved nearly 12.2% year over year, led by revenue increase partly offset by rise in expenses.

In spite of the earnings beat, the stock declined 0.9% on disappointing guidance for first quarter of 2019. Management guided EPS in the range of 67 to 75 cents, which is below the current Zacks Consensus Estimate of 87 cents.

Quarterly Details

The company generated revenues of $932.7 million, surpassing the Zacks Consensus Estimate by 2.7%. Also, the top line was up 2.4% from the year-ago period, mainly supported by a significant improvement in managed care contracting. Same unit revenues inched up 2.8% year over year, mainly driven by recent buyouts and higher patient volume. However, this upside was offset by the non-renewal of a few contracts.

General and administrative expenses rose 3.6% to $112.8 million.

Interest expense of the company escalated 28.3% to $25.4 million , primarily due to higher effective interest rate on borrowings between two periods.

In the quarter under review, EBITDA totaled $136.7 million, down by nearly 11.6%.

The company paid a total of $89.3 million in the reported quarter to purchase three radiology and one neonatology practices and also to make contingent purchase price payments for prior buyouts.

Financial Update

As of Dec 31, 2018, the company had cash and cash equivalents of about $36 million, down 40% from year end 2017.

The company incurred total debt of $1.9 billion, up 6.6% from 2017-end level and total assets of $5.9 billion, up 1.5% from the level at 2017 end.

Cash flows from operating activities were $127.6 million, down 34.7% year over year.

First-Quarter Outlook

For the first quarter of 2019, the company expects adjusted EPS to be in the band of 67-75 cents. Mednax projects adjusted EBITDA in the range of $108-$118 million.

This guidance assumes that total same-unit revenue growth for the three months ended Mar 31, 2019 will be in a range of flat to 2 % from the prior-year period.

Shares outstanding are predicted to be around 87.3 million.

Preliminary 2019 Guidance

On a preliminary basis, the company estimates adjusted EBITDA to be in the band of $550-$580 million.

The company intends to utilize part of the remaining $250 million share repurchase authorization through open market purchases in the first quarter of 2019.
 

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 -20.92% due to these changes.

VGM Scores

At this time, Mednax has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top 20% 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.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Mednax has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.




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