On Sep 19, Zacks Investment Research upgraded Amedisys Inc. (AMED) to a Zacks Rank #1 (Strong Buy).
Why the Upgrade?
After several quarters of drag in sales with sustained volume pressure, Amedisys recorded an encouraging second quarter of 2014 beating the Zacks Consensus Estimate on both the earnings and revenue front.
Second-quarter adjusted earningsfrom continuing operations came in at 25 cents per share, ahead of the Zacks Consensus Estimate by 8 cents. Earnings also marked a massive 38.9% surge year over year. On the other hand, although revenues of $305 million were down 3.5%, the top line surpassed the estimate of $301 million.
The company delivered strong performance in its Home Health segment on the back of management's successful initiative of reducing cost per visit. This was done by shifting more clinicians to the pay-per-visit model. Conversely, Amedisys failed to generate positive growth in its Hospice segment. Nevertheless, we believe, going forward, the company will achieve organic growth in this segment owing to its constant effort to revive the Hospice platform through better cost management. Our belief is also reinforced by the fact that Hospice has been a relatively consistent performer for Amedisys contribution-wise over the last few quarters.
Moreover, we are encouraged to note that the home health industry is poised for tremendous growth in the long term, driven by an aging U.S. population, patients’ desire for independence, and home health as a cheaper care modality. Strategic acquisitions and partnerships are also expected to add value to the company’s growth profile.
A strong quarterly performance prompted a rise in the Zacks Consensus Estimate for earnings in 2014 and 2015 over the last 60 days. The estimate surged a stupendous 213% to 50 cents in 2014 as all its seven estimates moved up. The same went up 165.3% to 69 cents for 2015 as once again, all the estimates moved north. The expected long-term growth rate for the stock is 9%.
Key Picks
Some other stocks worth considering in the home health care sector are Gentiva Health Services Inc. (GTIV), HEALTHSOUTH Corp. (HLS) and Almost Family Inc. (AFAM), all sporting a Zacks Rank #1.
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