Updated Research Report on AmSurg - Analyst Blog

On Apr 8, we issued an updated research report on AmSurg Corporation AMSG – a leading operator of single-specialty practice-based ambulatory surgery centers (ASCs). Despite uncertain economic conditions and high unemployment, we are encouraged by AmSurg's fourth-quarter results that squarely beat the Zacks Consensus Estimate.

AmSurg's fourth-quarter 2013 adjusted earnings per share EPS of 60 cents surged 22% year over year marking its third consecutive quarter of double-digit growth. EPS also steered ahead of the Zacks Consensus Estimate of 57 cents and exceeded the company's guidance range of 56−58 cents. Revenues increased 17% to $284.6 million beating the Zacks Consensus Estimate of $283.0 million.

Fourth-quarter 2013 revenues were encouraging owing to strong growth across all categories. Net revenue per procedure showed an improvement, driven by a combination of mix change due to an increase in the number of multispecialty centers as a percentage of center mix. Although same-center revenues increased a mere 2% on a year-over-year basis, the company is confident about figures rising further in the next fiscal as Ophthalmology and GI continue to perform well.

We are also encouraged with the company's newly formed joint venture with a hospital system and expect AmSurg to go ahead with its acquisition pipeline, supported by a strong cash position. Government agencies have undertaken initiatives to curtail healthcare expenditure, thereby resulting in a shift toward ambulatory surgery centers from admission to traditional hospitals.

However, AmSurg is encountering several challenges in the form of reimbursement issues and economic uncertainty. All of these collectively result in deferring elective procedures, along with a decline in doctor visits by patients, which in turn, leads to lower surgical volume.

AmSurg currently carries a ZacksRank #3 (Hold). Other stocks worth considering in the broader medical sector are Enzymotec Ltd. ENZY, St. Jude Medical Inc. STJ and Covidien plc COV. While Enzymotec holds a Zacks Rank #1 (Strong Buy), St. Jude Medical and Covidien carry a Zacks Rank #2 (Buy).