Amedisys Inc. AMED reported adjusted earnings from continuing operations of 30 cents per share in the first quarter of 2015. The bottom line reflected a massive improvement from the year-ago loss of 7 cents per share and came in 10 cents ahead of the Zacks Consensus Estimate. Better-than-expected sales growth, along with a robust margin owing to reduced cost of revenue, was responsible for the impressive earnings outcome during the quarter.
Barring any adjustment, the company's reported earnings of $1.07 a share demonstrated a marked improvement from the net loss of 39 cents per share incurred in the year-ago quarter.
Quarter in Detail
Amedisys primarily derives revenues from its home health and hospice agencies. First-quarter 2015 net service revenues grossed $301.6 million, up 1% year over year. The top line also exceeded the Zacks Consensus Estimate of $300 million by a whisker.
Within the company's Home Health division, net service revenues totaled $241.4 million (up 1.9% year over year) in the first quarter. While Medicare revenues of $187.3 million declined 0.7% year over year, this was offset by a 12.7% increase in non-Medicare revenues of $48 million.
Within the Hospice division, net service revenues grossed $60.2 million (down 2.9% year over year) including Medicare revenues of $56.5 million and non-Medicare revenues of $3.7 million.
The company reported a 256 basis points (bps) expansion in gross margin to 43.3% in the first quarter with a 3.4% decline in cost of service revenues. Expenses on salaries and benefits declined 17.5% to $68.5 million, while other expenses fell 22.5% to $33.1 million. Amedisys posted adjusted operating income of $28.9 million in the reported quarter, reflecting a massive increase from the adjusted operating loss of $4.1 million in the first quarter of 2014.
Amedisys exited the quarter with cash and cash equivalents of $3.1 million compared with $8.0 million at the end of Dec 31, 2014. The company's long-term obligations (excluding current portion) were $98.4 million versus $116.4 million at year-end 2014. Net operating cash flow was $14.5 million, compared with $6.3 million worth of net cash used in operating activities in the year-earlier period.
Our Take
Amedisys reported impressive first-quarter financial results wherein the bottom and the top line exceeded the respective Zacks Consensus Estimate and improved on a year-over-year basis. In home health, the company continued to generate strong organic growth in Medicare and non-Medicare revenues. Despite a decline in the quarter’s Hospice revenues, the company witnessed organic growth in the segment. Amedisys expects this turnaround in the Hospice segment to be a sustainable one. The company is also upbeat about the recent leadership changes at the executive level.
However, the company apprehends that over the next three quarters, its reported results may be impacted by higher restructuring costs. Accordingly, the company has not provided any guidance for 2015. Currently, the company remains strategically focused on increasing its operational efficiency by reducing its cost of revenue and general and administrative expenses. Encouragingly enough, the company has already successfully cut down on these expenses to a certain extent, as can be observed in the reported quarter's outcome.
Zacks Rank
Currently, the stock carries a Zacks Rank #2 (Buy).Some other well-placed medical stocks are Quest Diagnostics Inc. DGX, Chemed Corp. CHE and AAC Holdings, Inc. AAC all with the same Zacks Rank as Amedisys.
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