Auriga: Unemployment and Economy Improvement at Healthcare Services

In a research report published today by Auriga, Healthcare Management Associates

saw significantly lower flu activity in 1Q11, along with a drop it unemployment. According to Auriga, “Channel checks indicate orthopedic surgeries are growing, while cardiac cases are flat in HMA markets. Unemployment rate and economic activity are improving which should lower bad debt levels as the year progresses and may drive EPS growth above projection. We are adjusting our revenue, margin and EPS in 1Q to reflect current trends. Our 1Q12 revenue remains virtually the same as we lower volume (flu) but increase surgical growth. Our new 1Q12 EPS is $0.24 (previous $0.25) as we adjusted our SWB, supplies and bad debt assumptions. We believe HMA's deployment of surgical robots in its facilities should continue to drive company's surgical market share, which combined with margin expansion opportunity at acquired facilities, capacity to do more transactions, and focus on costs should continue to drive earnings in 2012 and beyond – all without an improvement in economy. Reiterate our BUY rating and price target of $12.” Healthcare Management Associates closed yesterday at $6.69.