AmSurg Slips to Strong Sell on Downward Estimate Revisions

On Aug 22, 2014, Zacks Investment Research downgraded AmSurg Corp. (AMSG) to a Zacks Rank #5 (Strong Sell) from a Zacks Rank #3 (Hold). AmSurg has delivered negative earnings surprises in 2 of the last 4 quarters with an average miss of 0.50%.

Reasons for the Downgrade

AmSurg reported its second-quarter results on July 31, 2014. Despite the company registering year-over-year improvement in the quarter, both its top and bottom line missed the Zacks Consensus Estimate.

Adjusted earnings per share (EPS) from continuing operations came in at of 63 cents, missing the Zacks Consensus Estimate by a penny. This earnings result also failed to exceed the EPS guidance range provided by the company.

Sales grossed $281.1 million improving 5.2% year over year but missed the Zacks Consensus Estimate of $283.0 million. Moreover, AmSurg exited the reported quarter with cash and cash equivalents of $44.9 million, down 11.6% from $50.8 million at the end of 2013. Besides, headwinds like reduction in workers' compensation reimbursement, sequestration and increased interest expense are intimidating.

Following a disappointing second-quarter, AmSurg has witnessed downward estimate revisions. For the current quarter, out of 4 analysts, 3 have lowered estimate revisions, while for the current year, out of 4 analysts, 2 have lowered estimates.

The Zacks Consensus Estimate for earnings in 2014 and 2015 has also showed a downward trend. The consensus for 2014 has declined 10.3% from $2.53 a month ago to $2.27, while the same for 2015 has dropped 11.1% from $3.16 a month earlier to $2.81.

Other Stocks to Consider

Some better-ranked stocks in the same industry include Almost Family Inc. (AFAM), Amedisys Inc. (AMED) and Chemed Corp. (CHE). All these stocks sport a Zacks Rank #1 (Strong Buy).