On Aug 26, 2014, Zacks Investment Research downgraded MedAssets, Inc. (MDAS) to a Zacks Rank #4 (Sell) from a Zacks Rank #3 (Hold).
Why the Downgrade?
MedAssets has been witnessing a negative trend in earnings estimate revision over the past one month. For 2014 and 2015, four estimates moved down in the past 30 days, with no upward revision.
Also, the Zacks Consensus Estimates for earnings in 2014 and 2015 have declined. While, the Zacks Consensus Estimate for 2014 fell 2.5% to $1.16, the same for 2015 has dropped 3.7% to $1.29 over the last 30 days.
On Jul 30, MedAssets posted adjusted earnings per share of 25 cents for the second quarter of 2014, which was in line with the Zacks Consensus Estimate but lower than the year-ago level by a penny. Following the earnings release, shares of MedAssets have dropped 7.4% till the last closing date.
Revenue growth at the Spend and Clinical Resource Management (SCM) segment fell below management’s expectations owing to short-term pressure on GPO-related administrative fees. Meanwhile, second-quarter bookings at the segment decreased 60% year over year due to the timing of a couple of larger deals expected to be signed.
MedAssets also saw a decline in net administrative fees of 0.6% on a year-over-year basis. Weak hospital utilization, impact of adverse weather conditions on first-quarter volume and the consequent decline in second-quarter administrative fees, and a lower revenue mix from secondary and non-acute clients were the primary reasons which marred the company’s second-quarter performance.
Further, the evolving healthcare environment marked with significant changes in patient demographics and reimbursement is expected to pose several operational and strategic challenges for healthcare organizations like MedAssets, going forward.
Other Stocks to Consider
Some better-ranked medical services stocks include ICON Public Limited Co. (ICLR), Air Methods Corp. (AIRM) and Continental Resources, Inc. (CLR). While ICON and Air Methods sport a Zacks Rank #1 (Strong Buy), Continental Resources retains a Zacks Rank #2 (Buy).
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