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Why Amedisys Shares Sank

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Amedisys (NASDAQ: AMED  ) , a home health and hospice care provider, tumbled as much as 15% after reporting its fourth-quarter earnings results.

So what: For the quarter, Amedisys reported that net service revenue fell 2% to $362.9 million as earnings from operations dipped 53% to $0.23 from $0.49 in the previous year. Wall Street had been expecting just $0.22 in EPS, however, the net revenue consensus estimate of $373.3 million was decisively short. Looking ahead, Amedisys forecast 2013 full-year EPS of $0.60-$0.70 and total sales of $1.425 billion to $1.45 billion compared to expectations of $0.78 in EPS and $1.52 billion in revenue from analysts.

Now what: And that's why Amedisys' earnings report was one of the three can't-miss health-care events of the week! Amedisys' forward guidance is factoring in both bigger technological investments and also the 2% Medicare sequestration amount, which analysts seem to have forgotten about when formulating their estimates. Assuming the company can boost its operational efficiency, a boom in an aging population should see a dramatic rise in hospice needs over the next decade, which may be able to counteract any reductions in Medicare reimbursements. It's definitely a name worth keeping your eyes on!

Craving more input? Start by adding Amedisys to your free and personalized watchlist so you can keep up on the latest news with the company.

While you can certainly make huge gains in health-solutions providers like Amedisys, the best investing approach is to choose great companies and stick with them for the long term. The Motley Fool's free report "3 Stocks That Will Help You Retire Rich" names stocks that could help you build long-term wealth and retire well, along with some winning wealth-building strategies that every investor should be aware of. Click here now to keep reading.

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9/28/2016 4:00 PM
AMED $48.45 Up +0.60 +1.25%
Amedisys CAPS Rating: **