Amedisys: The right medicine

In a sick stock market, health-care companies often will outperform those in other sectors. For the past year, Amedisys Inc. (Nasdaq:AMED) has proven the right medicine to chase away at least some investor blues.

Shares of the Baton Rouge, La.-based provider of home-health-care services have risen about 47% in the past year, and of the analysts surveyed by Thomson Reuters, eight of 13 have Amedisys at either “strong buy” or “buy,” with five at “hold.”

After bottoming out Oct. 9 at $43.51, Amedisys rebounded along with the overall market on Oct. 13, climbing 15% to $51.48. Amedisys closed Monday at $53.86.

With some 80 million baby boomers approaching senior citizen status, companies such as Amedisys expect to see booming demand for their services in the coming decades. The “silver tsunami” could push Medicare beneficiaries to 79 million by 2030 from 39 million in 2000. Last year, Amedisys derived 89% of its revenue from Medicare. The typical Amedisys home-health patient is Medicare-eligible and 80 to 84 years old, with many afflicted by several serious maladies.

Founded by chairman and CEO William Borne in 1982, as of Dec. 31 Amedisys had 325 home-health agencies, 29 hospice agencies and managed a half-dozen others  — all Medicare certified — in 30 states.

For 2007, revenue climbed 29% to $698 million, with net income of $13.1 million, a 70% improvement over 2006. During 2007, Amedisys completed deals for 38 home-health and 11 hospice agencies.

Amedisys has made a number of acquisitions in recent years in the highly fragmented home-health sector, but went on a buying spree in the early 2008. Amedisys opened with the Jan. 2 acquisition of six home-health agencies in Georgia and South Carolina, followed by 24 Kentucky and Tennessee agencies in early February for $43 million. That set the stage on Feb. 19 for Amedisys’ biggest deal ever — $395 million for TLC Healthcare Services, a New York-based service provider with 104 outlets in 22 states and the District of Columbia.

Borne told analysts that for Amedisys, the TLC deal “furthers our stated goal and strategic vision of becoming the leading provider of home-health nursing services throughout the United States.” As of June 30, Amedisys had 504 agencies in 35 states, and it continues to nibble away with other smaller deals.

The additions are expected to help push Amedisys past $1 billion in revenue. Despite the rocky stock market, company executives have stuck with a July 17 guidance update calling for full-year revenue of $1.1 billion to $1.15 billion (up from $1.05 billion to $1.1 billion), and earnings per share of $3 to $3.10 (up from $2.70-$2.80). Analysts polled by Thomson Reuters are looking for $3.11 in earnings, with revenue of $115.8 billion.

Shares of Amedisys climbed to historical highs this summer, hitting $67.98 on July 30, after the release of record mid-year results. The stock’s 52-week low of $36.18 came on March 17. Amedisys tumbled 18% on Aug. 12 after Citron Research issued a disparaging report about several corporate executives. Some analysts who cover Amedisys responded and discounted the report.

Changes to Medicare reimbursement rates could always negatively or positively impact health-care companies such as Amedisys. But with planned organic growth and its acquisitive nature, Amedisys appears poised to emerge as a national player in home-health care.

 

 

---