On Dec 29, we issued an updated research report on AmSurg Corporation (AMSG) – a leading operator of single-specialty practice-based ambulatory surgery centers (ASCs). Amid uncertain economic conditions and high unemployment, AmSurg posted a mixed third-quarter 2014 outpacing the Zacks Consensus Estimate for earnings, even though revenues missed the mark. However, on a year-over-year basis, AmSurg reported a massive 91.3% growth in its top line on the back of Sheridan's performance in the quarter, post its takeover by the company.
AmSurg’s third-quarter adjusted earnings per share of 66 cents increased 24.5% year over year sailing past the Zacks Consensus Estimate of 54 cents. Earnings also exceeded the company’s guidance.
We are also encouraged by the company’s recent acquisition of Sheridan Healthcare, a prominent multi-specialty outsourced physician services provider. According to the company, this acquisition will serve as a golden opportunity for Amsurg to foray into the huge and fast growing physician outsourcing market. Currently, AmSurg is working on the operational integration of Sheridan.
AmSurg has made consistent progress with several quarters of double-digit sales growth. Third-quarter revenues were impressive owing to strong growth across all categories. According to the company, the combination of Sheridan’s position in outsourced physician services and AmSurg’s leadership in ambulatory services has been received well in the niche markets and has generated a strong pipeline of cross-selling opportunities. The domestic development pipeline also remains robust.
AmSurg is leveraging on the collective resources to identify fresh buyout possibilities for anesthesia, emergency, radiology neonatology services along with new ASC acquisition opportunities. The aim is to develop additional health system partnerships, drive new contract growth by introducing Sheridan physician solutions to health systems operating in the over 100 markets currently served by AmSurg’s surgery centers, and collaborate with physicians to integrate the Sheridan anesthesia capabilities into AmSurg's ASCs.
We expect AmSurg to confidently proceed on its acquisition pipeline, supported by a strong cash position. Notably, government agencies have undertaken initiatives to curtail healthcare expenditure, thereby resulting in a shift toward ambulatory surgery centers from admission to traditional hospitals.
However, AmSurg is encountering several challenges in the form of reimbursement issues and economic uncertainties. These factors collectively result in deferring elective procedures, along with a decline in doctor visits by patients, which in turn, leads to lower surgical volumes.
AmSurg currently carries a Zacks Rank #2 (Buy). Some other stocks worth considering in the same sector are Amedisys Inc. (AMED), Chemed Corp. (CHE) and Addus HomeCare Corporation (ADUS). All the three stocks sport a Zacks Rank #1 (Strong Buy).
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