Mednax (MD) Down 55.2% Since Last Earnings Report: Can It Rebound?

A month has gone by since the last earnings report for Mednax (MD). Shares have lost about 55.2% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Mednax due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

MEDNAX Q4 Earnings and Revenues Surpass Estimates

MEDNAX delivered fourth-quarter 2019 adjusted earnings of 91 cents per share, which beat the Zacks Consensus Estimate by 1.1%. However, the bottom line declined nearly 1.1% year over year.

The company recorded growth in same unit revenues and lower expenses.

Full-Year Highlights

Operating income per share of $3.38 outpaced the Zacks Consensus Estimate of $3.36 by 0.6%. However, the bottom line decreased 4.8% from 2018.

Revenues of $3.5 billion were in line with the Zacks Consensus Estimate but increased 1.7% from 2018.

Quarterly Details

The company generated revenues of $905 million, which beat the Zacks Consensus Estimate by 0.4%. However, the top line was down 3% from the year-ago period. Same unit revenues increased 2.3% year over year, mainly driven by recent buyouts. However, this upside was offset by the non-renewal of a few contracts.

General and administrative expenses declined 8.2% to $96.9 million.

Interest expense of the company escalated 9.1% to $27.7 million, primarily due to higher effective interest rate on borrowings between two periods.
In the quarter under review, EBITDA totaled $132.2 million, up nearly 1.5%.

The company paid a total of $82.6 million in the reported quarter to fund acquisitions and to make contingent purchase price payments for previously completed acquisitions and $6.9 for capital expenditures.

Financial Update

As of Dec 31, 2019, the company had cash and cash equivalents of about $112.8 million, up 147.9% from year-end 2018.

The company incurred total debt of $1.75 billion, down 12.5% from 2018-end level and total assets of $4.1 billion, down 30.2% from the level at 2018 end.

Cash flow from operating activities was $127.6 million, up 3.1% year over year.

First-Quarter Guidance

For the first quarter of 2020, the company expects adjusted EPS to be in the band of 55-63 cents. MEDNAX projects adjusted EBITDA in the range of $90-$100 million.

This guidance assumes total same-unit revenue growth for the three months ended Mar 31, 2020 to be in the range of 2% to 4%.

Shares outstanding are predicted to be around 84.5 million.

Preliminary 2020 Guidance

On a preliminary basis, the company estimates adjusted EBITDA to be in the band of $450-$490 million.

The company estimates an effective tax rate of 27%. Average diluted shares for the full-year are expected to be approximately 85 million.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision. The consensus estimate has shifted -7.44% due to these changes.

VGM Scores

Currently, Mednax has a strong Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. It's no surprise Mednax has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.