Why Air Methods Shares Ballooned

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 Air Methods Corp.  (NASDAQ: AIRM  ) , a provider of air medical emergency transport services, rose as much as 17% after reporting its second-quarter earnings results.

So what: Last night's earnings report was certainly a mixed bag, so follow along and you'll find out exactly why shares are up so voraciously today. For the quarter, Air Methods reported just a 2% revenue increase to $226.2 million as net income declined by 39% (an adjusted profit of $0.52 per share). Patient transports also fell 9% this quarter from the year-ago period. Comparatively, the Street had forecast revenue of $229 million and EPS of $0.60. However -- and here's the big "however" of why Air Methods is up today -- poor weather accounted for a majority of the weakness in Air Methods' results, and the company anticipates a "meaningful improvement in future earnings" as weather improves and maintenance costs decline.

Now what: With the market being forward-looking, you can definitely say that today's move is purely based on guidance. Weather is sometimes a forgivable scapegoat, but it won't fly as an acceptable excuse more often than it will in the financial world. With patient revenue per transport once again on the rise and the company projection a return to meaningful earnings growth, I think that even after today's pop Air Methods could represent a solid bargain and would suggest interested investors dig deeper into this company.

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Comments from our Foolish Readers

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  • Report this Comment On August 10, 2013, at 10:52 PM, mattmosa wrote:

    I was wondering why the stock popped. Just a cursory look at their report the other day and I couldnt understand why the stocked moved up.

    Now I know, it was the weather,,,,,,,,again.

    If I remember correctly last quarters miss was also attributed to the weather and to uninsured patients

    .

    So next quarter will be better? How could AIRM be so sure what the next quarters weather will be?

    Must be pretty good weather forecasters I say.

    OK I'm sounding a little suspicious I know but the weather thing, could be interpreted as a bit shaky.

    I have been eyeballing the stock but in the here and now I'm not paying up for two misses and a forecast.

    AIRM is an interesting company but two misses in a row blamed on bad weather among other things is a wait and see next 10Q for me.

    I have been eyeballing the stock but in the here and now I'm not paying up for two misses and a forecast.

  • Report this Comment On August 15, 2013, at 5:29 PM, TraderJoe90 wrote:

    This stock is 100% owned by institutions with a small float. It was ripe for a short squeeze, but there is a reason why stocks like AIRM have a large short interest; it's a poor performer and short sellers are most often considered smart money. So, institutions may try to squeeze for another month or so, but if they intend to sell stock to someone other than the other institutions holding it up, they'll need to lower it <$30. Two misses and mgmt saying the weather will be better. What a joke! Why would anybody waste their money buying this stock when there is so many better options out there.

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