On Jan 6, 2015, we issued an updated research report on AmSurg Corporation AMSG, a leading operator of single-specialty practice-based ambulatory surgery centers (ASCs).
AmSurg has, so far, made consistent progress with several quarters of double-digit sales growth. Significant contribution from Sheridan Healthcare, which recorded its fourth full quarter as part of AmSurg’s business, drove the company’s third-quarter revenues. It also demonstrated 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.
Meanwhile, the domestic development pipeline at AmSurg remains robust. Additionally, the company’s center acquisition pipeline has regained momentum. Currently, the company is identifying acquisition opportunities for anesthesia, emergency, radiology and neonatology apart from discovering new ambulatory surgical care (ASC) acquisition opportunities. During the third quarter, the company acquired two ASCs and opened one de novo center. It also acquired two additional multi-specialty ASCs subsequent to the end of the third quarter.
Moreover, solid third-quarter growth and an impressive pace of acquisitions have encouraged management to raise AmSurg’s 2015 guidance indicating the presence of some near-term catalyst that will aid financials in the near future. We are also optimistic about the government agencies’ initiatives to curtail healthcare expenses, leading to a shift toward ambulatory services business.
However, continuous cost escalation, economic uncertainty along with unemployment and budget uncertainties pose major obstacles on AmSurg’s growth path in the ambulatory services space. In the last reported quarter, AmSurg’s adjusted operating expenses spiked 22% year over year due to higher salaries and benefits, supply cost and other operating expenses.
Zacks Rank
Amsurg presently carries a Zacks Rank #2 (Buy). Other stocks worth considering in the same sector includePharMerica Corporation PMC, China Cord Blood Corporation CO and Foundation Healthcare, Inc. FDNH. While PMC sports a Zacks Rank #1(Strong Buy), both CO and FDNH hold a Zacks Rank #2 (Buy).
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