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2010-03-02

AmSurg Reports In Line

AmSurg Corp’s (AMSG: 21.21 0.00 0.00%) fourth quarter earnings per share (EPS) came in at 42 cents, meeting the Zacks Consensus Estimate and a penny higher than the year-ago period. For the full year 2009, the company reported an EPS of $1.71 compared to $1.55 in 2008.
 
Revenues for the reported quarter increased 10% to $168.6 million compared to $153.1 million in the year-ago period. The company reported a 1% rise in net earnings to $12.98 million compared to $12.88 million in the fourth quarter of 2008.

Results for the reported quarter included a negative impact of 5 cents per share from certain corporate overhead expenses, change in accounting rule and revision of the Medicare payment system for ambulatory surgery centers (ASCs). Revenues for the full year increased 11% to $668.7 million.
 
The addition of 14 centers in operation in the last twelve months and a 10% increase in procedures were primarily responsible for the growth in revenue.  Despite the uncertain economic environment, same-center revenue increased 1% during the quarter. The Medicare rule revision reduced same center revenues during the quarter and full year by approximately 100 basis points.
 
AmSurg continued its acquisitions during the quarter as well. It acquired a large orthopedic center in Phoenix at the end of the quarter. Following this acquisition, the company now operates two of the largest orthopedic centers in Phoenix.
 
Operating margin recorded a decline of 176 basis points to 36.26% driven by an increase in salary related costs as well as other operating expenses.

Cash flow from operating activities was $56.5 million at the end of the reported quarter, marginally up from $55.5 million in the corresponding period of 2008.

AmSurg exited 2009 with $29.4 million ($31.5 million in 2008) in cash and cash equivalents and $289 million ($266 million in 2008) in long-term debt. Although the debt burden increased 8.6%, the ratio of total debt to capitalization at the end of 2009, which came in at 37%, remained unchanged from the previous year.

AmSurg provided guidance for the first quarter and full year 2010. Revenues are expected in the range of $720−$750 million for 2010 with EPS in the range of $1.77−$1.80. The Zacks Consensus Estimate for 2010 EPS of $1.82 is higher than the guidance. For the first quarter of 2010, the company expects earnings in the range of 41−43 cents per share, in line with the Zacks Consensus Estimate of 42 cents. About 13−16 new centers are likely to be opened in 2010.

With a relatively solid development and acquisition pipeline in place, supported by a fairly strong cash position, we believe the company’s growth will continue over the medium term. However, rising unemployment leads to fewer individuals with insurance coverage, which can impact discretionary procedures performed at the ASCs. We are “Neutral” on the stock.

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