Coverage Initiated on Amedisys - Analyst Blog

On Mar 27, 2014, we initiated coverage on health and hospice service provider, Amedisys Inc. AMED. Crown Holdings had a tepid fourth-quarter 2013 with sustained volume pressure. Although the company's revenues surpassed the Zacks Consensus Estimate, the bottom line missed the same.

Amedisys' adjusted lossfrom continuing operations of 5 cents per share in the reported quarter was wider than the Zacks Consensus Estimate loss of 3 cents. It also marked a massive fall from the year-ago adjusted income from continuing operations of 25 cents. Revenues of $303.5 million fared better than the estimate of $295 million but were down 13.7% year over year. Amedisys also failed to meet its guidance for yet another quarter.

Per management, three factors led to the decrease in earnings: higher cost per visit in home health, higher-than-expected employee healthcare cost and an accrual of $450,000 related to one of the company's care centers.We believe poor segment performance, sluggish growth trends and the adverse impact from sequestration led to the dismal fourth-quarter results. Moreover, the fact that no guidance was provided for the upcoming fiscal failed to inspire confidence about any improvement in the near term.We are also wary about competitive pressures, especially from small local providers. Additionally, the reimbursement headwind continues to weigh on the stock.

Nonetheless, the company continues cater to the surging demand for its home health and Hospice services. Moreover, we are encouraged to note that the home health industry is poised for tremendous growth in the long term, driven by the aging U.S. population, patients' desire for independence and home health as a cheaper care modality. Strategic acquisitions and partnerships are also expected to add to the company's growth.

Other Stocks to Consider

The stock currently carries a Zacks Rank #3 (Hold).  Some better-ranked stocks in the same sector include Chemed Corp. CHE, China Cord Blood Corporation CO and PharMerica Corporation PMC. While Chemed Corp. sports a Zacks Rank #1 (Strong Buy), China Cord Blood and PharMerica carry a Zacks Rank #2 (Buy).