Why Is Amedisys (AMED) Down 16.2% Since Last Earnings Report?

It has been about a month since the last earnings report for Amedisys (AMED). Shares have lost about 16.2% in that time frame, outperforming the S&P 500.

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

Amedisys Q4 Earnings Beat Estimates, Revenues Miss

Amedisys, Inc. reported adjusted earnings per share of 94 cents in fourth-quarter 2019, up 3.3% from the year-ago figure. The bottom line also beat the Zacks Consensus Estimate of 93 cents by 1.1%.

Net service revenues grossed $500.7 million, up 15.3% year over year. However, the top line missed the Zacks Consensus Estimate by 1.8%.

2019 at a Glance

In 2019, the company reported net service revenues worth $1.96 billion, which improved 17.9% from the previous year. The top line missed the Zacks Consensus Estimate by 0.5%.

Adjusted earnings for the year was $4.40, up 21.2% from that of 2018. The figure also beat the consensus mark by 0.2%.

Quarter in Detail

Within the company's Home Health division, net service revenues totaled $316.2 million in the quarter, reflecting a 4% improvement year over year. Moreover, Medicare revenues of $215.2 million inched up 1.7% year over year. Non-Medicare revenues improved 9.2% to $101 million.

Within the Hospice division, net service revenues were $164.6 million (up 51.3% year over year) including Medicare revenues of $156.6 million (up 51.3%) and non-Medicare revenues of $8 million (up 50.9%).

The company recently integrated two additional operating segments within its business, namely, Personal Care and Corporate. At Personal Care, net service revenues totaled $19.9 million, representing a decline of 7.9% from the year-ago number. Meanwhile, the Corporate segment did not register any revenues in the fourth quarter.

Margins

Gross margin expanded 133 basis points (bps) to 40.9% in the quarter under review. Further, expense on salaries and benefits advanced 20.2% to $101.3 million. Other expenses increased 12.6% to $48.2 million as well. Meanwhile, operating profit of $41.6 million reflects a 14.1% rise from the year-ago figure. Operating margin also contracted 10 bps to 8.3% from the prior-year level.

Cash Position

Amedisys exited the December quarter with cash and cash equivalents of $30.3 million compared with $20.2 million in the prior-year quarter. The company's long-term obligations (excluding current portion) were $232.3 million at the end of the fourth quarter compared with $5.8 million in the year-ago quarter.

At the end of 2019, net cash provided by operating activities was $202 million compared with $223.5 million at the end of 2018.

2020 Guidance

Net service revenues are projected to range between $2.12 billion and $2.16 billion.

Adjusted earnings is expected to be in the band of $4.90-$5.13 (on the basis of an anticipated 33.4 million shares outstanding).

Adjusted EBITDA is estimated to be in the range of $250-$260 million.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month. The consensus estimate has shifted -8.07% due to these changes.

VGM Scores

Currently, Amedisys has a strong Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. 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 these revisions indicates a downward shift. Notably, Amedisys has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.