Shares of AdaptHealth (AHCO 1.46%) were skyrocketing Tuesday morning, up 29.7% as of 10:56 a.m. ET. That huge gain came after the home medical equipment and supplies provider announced its 2023 fourth-quarter and full-year results before the opening bell.
AdaptHealth reported net revenue in the fourth quarter of $858.2 million, up 10% year over year. The average analysts' estimate was for revenue of $825.4 million. The company posted a net loss in Q4 of $254.5 million, or $1.91 per share. This result was well below the consensus earnings estimate of $0.18 per share.
NASDAQ: AHCO
Key Data Points
Why did AdaptHealth stock jump after missing Q4 earnings estimates?
When companies miss analysts' earnings estimates, their stocks typically don't soar -- they fall. Why did investors react so positively to AdaptHealth's Q4 update? As you might expect, there was more to the story.
AdaptHealth wrote down $318.9 million of goodwill in the fourth quarter. Without this accounting move, the company would have posted a solid profit.
Investors also cheered AdaptHealth's 2024 guidance. The company expects to generate net revenue of between $3.25 billion and $3.35 billion this year. Although the midpoint of this range equates to growth of only 3%, it doesn't include the impact of acquisitions that haven't closed yet. AdaptHealth also projected free cash flow (FCF) of between $150 million and $180 million, up nicely from the $143.2 million in FCF generated in 2023.
Is AdaptHealth stock a buy?
AdaptHealth won't be appealing to income investors, since the company doesn't pay a dividend. Growth investors probably won't find the stock all that attractive either.
However, I think that value investors might want to take a hard look at AdaptHealth. Its shares currently trade at only 11 times forward earnings, and its forward price-to-FCF ratio is a low 8.2 based on the midpoint of the company's FCF guidance range.
