Reiterate HMA at Neutral - Analyst Blog
February 25 2013 - 9:40AM
Zacks
On Feb 19, 2013 we retained
Health Management Associates (HMA) at Neutral
after the company missed Zacks Consensus Estimate for earnings but
beat revenue estimate in the fourth quarter 2012. We continue to
have doubts about sustained growth in volumes. Our skepticism is
supported by a drop in (same hospital) admissions and volume
pressure in the fourth quarter.
Why the
Retention?
On Feb 14, Health Management posted
fourth-quarter 2012 adjusted earnings of 19 cents per share,
missing the Zacks Consensus Estimate of 20 cents per share.
Revenues in the reported quarter increased 8.3% year over year to
$1,715 million, beating the Zacks Consensus Estimate of $1,686
million.
Over the past 30 days, the Zacks
Consensus Estimate for 2013 has moved up by just 3 cents to 87
cents while for 2014 it has inched up by a penny to $1.08 during
the same timeframe.
We believe that bad debt may no
longer be an area of looming concern. Bad debt expense remained
within a band at 13.7% of revenues in the fourth-quarter of 2012,
higher than 12.3% in the year-ago quarter. We expect Health
Management’s bad debt expense to be restrained in 2013.
Overall, total uncompensated care
(the total of uninsured discounts, indigent/charity write-offs, and
provision for bad debt as a percentage of adjusted revenue) was on
the higher side at 28.7% in fourth-quarter, up from 25.4% in the
prior-year quarter.
Other Stocks to
Consider
Health Management currently carries
a Zacks Rank #3 (Hold). Acadia Healthcare Company,
Inc. (ACHC) carries a Zacks Rank #2 (Buy) and is expected
to do well. Furthermore, Merge Healthcare
Incorporated (MRGE) retains a Zacks Rank #2 (Buy) and
warrants a look.
ACADIA HEALTHCR (ACHC): Free Stock Analysis Report
HEALTH MGT ASSC (HMA): Free Stock Analysis Report
MERGE HEALTHCAR (MRGE): Free Stock Analysis Report
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