Acadia Healthcare Company (ACHC) reported fourth-quarter 2014 adjusted earnings (EPS) of 46 cents per share, which surged an impressive 58.6% year over year. However, adjusted EPS was in line with the Zacks Consensus Estimate.
Quarter Details
Revenues in the reported quarter escalated 55.2% to $294.9 million, marginally higher than the Zacks Consensus Estimate of $294 million. The revenue upside may be primarily attributed to the addition of beds to Acadia’s existing facilities.
Same facility revenues gained 12.2% year over year to $212.4 million, mainly owing to an increase in patient days (up 11.5%) and admissions (up 19.7%). This growth helped Acadia Healthcare to gain further operating leverage, which in turn propelled same facility EBITDA margin to expand 160 basis points (bps).
Adjusted EBITDA margin in the fourth quarter expanded 190 bps to 22.5%.
Total expenses jumped nearly 53% on a year-over-year basis to $260.1 million.
Adjusted operating margin expanded 160 bps to 9.2%. The expansion in margins is courtesy the significant top-line growth which managed to largely offset the increase in expenses.
Financial Position
Cash and cash equivalents, as of Dec 31, 2014, amounted to $94.0 million, compared with $42.2 million at the end of the previous quarter. Long-term debt as of Dec 31, 2014 was $1.07 billion versus $1.02 billion as of Sep 30, 2014.
2015 Guidance
For full year 2015, Acadia expects adjusted EPS in the range of $2.03–$2.10, reflecting growth of approximately 32–36% over 2014. For the first quarter of 2015, the company expects EPS to lie in the band of 40–41 cents. Based on management’s projection, EPS in the first quarter of 2015 will exhibit an increase of 43–46% year over year.
Our Take
We feel Acadia has significantly gained from the acquisition of PiC, an independent behavioral health provider that managed to bring 23 facilities and over 1,200 licensed beds to Acadia.
On a year-over-year basis, Acadia delivered a stellar performance this quarter as well with respect to both lines. The company seems to be growing largely on the back of acquisitions along with reasonable organic growth. Through 2014, Acadia completed five acquisitions which brought 27 facilities and over 1,400 beds to the company. The company also added 378 beds at its existing facilities during the year.
Moreover, of late, Acadia entered into an agreement to acquire CRC Health Group, in a bid to expand its current presence in addiction and mental health services. Moreover, management is expected to evaluate potential acquisitions in 2015 and add new beds to its existing facilities in both the U.S. and the U.K.
However, high debt levels remain a concern, as according to us, it may hamper Acadia’s financial position in the long run.
Zacks Rank
Currently, Acadia Healthcare has a Zacks Rank #3 (Hold). Better-ranked stocks in the broader medical sector include Inogen (INGN), Synergetics USA (SURG) and ABIOMED (ABMD). All three stocks sport a Zacks Rank #1 (Strong Buy) and may be deemed good investment options over the short term.
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