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How Amedisys Blew Past Q3 Earnings Estimates

By Keith Speights - Oct 30, 2019 at 6:00AM

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Hint: Adjusted earnings numbers can involve plenty of adjustments.

Amedisys ( AMED 4.65% ) operates in the home healthcare market -- not the amusement park business. But it's taken investors on a roller coaster ride so far in 2019, with some major up-and-down swings in its share price.

The stock is currently on a nice upswing that was put at risk when Amedisys announced its third-quarter results after the market closed on Tuesday. Any worries that investors might have had, though, were put to rest by the company's Q3 update. 

Female nurse assisting mature male patient get out of his bed at home

Image source: Getty Images.

By the numbers

Amedisys announced Q3 revenue of $494.6 million, an 18.5% increase from the $417.3 million reported in the same quarter of the previous year. The company's reported revenue was slightly higher than the average analysts' revenue estimate of $494.16 million.

The company reported net income of $34.1 million, or $1.03 per share, on a generally accepted accounting principles (GAAP) basis. This reflected a solid improvement from the earnings of $31.4 million, or $0.96 per share, posted in the same period in 2018. 

On a non-GAAP adjusted basis, Amedisys' net income in the third quarter came in at $1.15 per share. This reflected a 21% increase from the prior-year period adjusted earnings per share (EPS) of $0.95. And it blew past the consensus Wall Street adjusted EPS estimate of $0.89.

Behind the numbers

Amedisys makes its money in three primary ways: home health, hospice, and personal care. Its biggest revenue generator is the home health segment. The company reported home health net service revenue of $311.5 million in Q3, up 5.6% year over year. Medicare revenue increased by only 2% over the prior-year period, while non-Medicare revenue jumped by 16%.

The company's hospice segment served as Amedisys' strongest growth driver in the quarter. Net services revenue soared 57% year over year to $162.4 million, boosted by acquisitions. Net service revenue for Amedisys' personal care segment increased by close to 9% to $20.7 million. 

So how did Amedisys beat the Wall Street Q3 adjusted EPS estimate so handily? The company had a basketful of special items that boosted its non-GAAP number. These mainly included acquisition and integration costs and legal fees that were factored out of its adjusted EPS result.

Amedisys CEO Paul Kusserow alluded to the acquisition and integration without specifically mentioning the financial impact in his comments about the company's third-quarter performance. He stated that Amedisys has "made great progress integrating the Compassionate Care acquisition," adding that the company was "once again near the top of the industry in quality for both home health and hospice."

Looking ahead

The company anticipates revenue for full-year 2019 to come in between $1.94 billion and $1.98 billion. Amedisys also expects full-year adjusted EPS will be between $4.32 and $4.39.

However, investing in healthcare stocks can involve a lot of uncertainty. That's especially true of the home health and hospice markets in which Amedisys operates. The company even noted that "we urge caution in considering the current trends and 2019 guidance" that was included with its Q3 update, stating that "the home health and hospice industry is highly competitive and subject to intensive regulations, and trends are subject to numerous factors, risks, and uncertainties."

There's always a possibility that more roller coaster rides could be on the way.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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