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Leerink Upgrades Mednax On Margin Expansion, Share Gains And Valuation


Mednax Inc (NYSE: MD) shares came under pressure Friday, dipping about 4 percent after Paul Singer's Elliott Associates declared a reduction in stake held in the company.

The Analyst

Leerink analyst Ana Gupte upgraded shares of Mednax from Market Perform to Outperform, citing margin turnaround, improvement in share gains at its neonatal segment and sell-off following the Elliott news, which she views as a buying opportunity. The analyst hiked the price target from $52 to $56.

The Thesis

Notwithstanding the "secularly tepid demand" for neonatal, Mednax is seeing outsized share gains, as MD-specific strategies are leading to volume growth in the low- to mid-single digits, Gupte said in a Monday note. The turnaround at anesthesia could drive about 120 basis point of margin expansion in 2019 and 2020, the analyst said.

Citing the anesthesia turnaround and neonatal volume growth, Gupte said her upwardly revised 2019 revenue and EBITDA estimates of $3,935 million and $654 million, respectively are above consensus. The 2020 revenue and EBITDA estimates of $4,273 million and $727 million, are also above consensus, she added.

The analyst said Mednax' Q3 guidance looks achievable. Free cash flow of $426 million, with a yield of 11 percent, is also attractive.

The Price Action

Along with Friday's sell-off, Mednax shares have shed about 15 percent year-to-date. At time of writing, the stock was up 2.8 percent to $46.89 Monday afternoon.

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Latest Ratings for MD

Feb 2021Credit SuisseMaintainsOutperform
Oct 2020Deutsche BankDowngradesHoldSell
Oct 2020UBSMaintainsSell

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Posted-In: Ana Gupte LeerinkAnalyst Color Upgrades Price Target Analyst Ratings

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