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Amedisys Earnings Beat; Revs Lag

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Home healthcare provider Amedisys (AMED - Free Report) reported net loss of $106.8 million or $3.52 per share in the fourth quarter of 2012, a considerable slide from net income of $4.3 million or earnings per share of 15 cents in the year-ago quarter. However, after adjusting for a sizeable goodwill impairment charges and other one-time items, adjusted earnings per share declined 53.1% year over year to 23 cents in the reported quarter, beating the Zacks Consensus Estimate by a penny.

For the full year, adjusted earnings per share decreased 52.8% from the prior year to $1.08, surpassing the corresponding Zacks Consensus Estimate of $1.04. The decline was mainly on account of significantly higher interest expense in 2012.

Amedisys primarily derives revenues from its home health and hospice agencies. Fourth-quarter net service revenue came in at $362.9 million, down 2% year over year. Revenues also trailed the Zacks Consensus Estimate of $373 million.

In 2012, net service revenue edged up 1.7% from the prior year to $1,487.9 million, missing the corresponding Zacks Consensus Estimate of $1,498 million.

For the company’s Home Health division, Medicare revenues were $233.2 million and non-Medicare revenues were $57.5 million in the fourth quarter. For the hospice division, Medicare revenues were $68.1 million and non-Medicare revenues were $4.2 million in the quarter. During the quarter, Amedisys opened four care centers as start-up locations as home health centers and hospice care centers. At the end of the quarter, the company operated 435 home health care centers and 97 hospice care centers.

The company reported a huge 232 basis points (bps) contraction in gross margin to 43.2% in the quarter. Expenses on salaries and benefits declined 1.3% to $84.3 million, while other expenses remained flat at $48.6 million. Non-cash compensation expenses soared to $1.2 million compared with $0.03 million in the prior year quarter. Amedisys incurred operating loss of $154.9 million in the quarter versus operating income of $14.7 million in the year-ago quarter.

Amedisys exited 2012 with cash and cash equivalents of $14.5 million, down 69.8% from the comparable period. Net cash provided by operating activities in 2012 was $69.5 million, down 50.8% from the prior year. The company’s long-term obligations (less current portion) were $66.9 million, down 40.5% from the prior year.


Amedisys issued guidance for 2013. Net service revenue is envisaged in the range of $1.425 billion to $1.45 billion. The current Zacks Consensus Estimate of $1.51 billion lies outside the guidance range. The company forecasts earnings per share in the range of 60 to 70 cents. The Zacks Consensus Estimates of 80 cents for 2013 lies outside the outlook band.

Our Take

Amedisys posted another challenging quarter with its top-line missing the Zacks Consensus Estimate. The guidance for 2013, which lies below our projections, also failed to inspire confidence. The company’s performance also weighed on the stock as share prices plunged 9.71% (or $1.19) following the results.  

Apart from the considerable goodwill impairment charge, we believe that the highly uncertain home nursing reimbursement environment, coupled with significant reduction in Medicare reimbursement in 2011 and 2012 has affected Amedisys’ performance over the past few quarters. We expect the healthcare reimbursement pressure to persist even in 2013, thereby weakening the company’s performance.

Thus, we remain on the sidelines for Amedisys. The stock carries a Zacks Rank #3 (Hold). On the other hand, medical stocks such as Cyberonics , Given Imaging and Medical Action warrant a look. These stocks carry a Zacks Rank #1 (Strong Buy).

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