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AmSurg Poised on Strategic Buyouts, Rising Costs a Concern

On Apr 18, 2016, we issued an updated research report on Nashville, TN-based AmSurg Corp. AMSG – a leading operator of single-specialty practice-based ambulatory surgery centers (ASCs). The company develops, acquires, and operates practice-based ASCs in partnership with physician practice groups throughout the U.S.

AmSurg ended 2015 on an impressive note with its fourth-quarter results comfortably beating the Zacks Consensus Estimate of both earnings and revenues. The outperformance was driven by successful execution of the company’s organic growth and acquisition strategies in both the Ambulatory and Physicians Services businesses. However, the company’s weak cash balance raises concerns.

AmSurg, along with Sheridan Healthcare, marked 2015 as a year of great transformation, execution and positive momentum. Throughout the year, the company remained committed to its physician-centric culture that resulted in a powerful year of M&A growth and expansion, yielding 16 transactions. Impressively, management was able to deploy nearly $1 billion in growth capital.

Management is also upbeat about the company’s latest takeover of the multi-specialty outsourced physician services provider – Sheridan Health, which is expected to help AmSurg accelerate growth in its own existing markets and create a more comprehensive development pipeline across all service lines.

The combined entity with its unique business model is expected to pose a major challenge in the competitive niche by covering 38 states and establishing its hold on a total addressable market as large as $70 billion. It is also anticipated to improve the company’s response to emerging market trends.

On the flip side, the consistent rise observed in the company’s operating expense continues to weigh on its bottom line. Evidently, in the fourth quarter of 2015, AmSurg’s adjusted operating expenses spiked 20.9% year over year to $520.6 million.

Moreover, the global downturn in the macroeconomic scenario impacted the market for medical technologies in the U.S. Add constrained hospital spending to these concerning macroeconomic factors, and lower demand looks evident for ASCs like AmSurg.

AmSurg currently carries a Zacks Rank #3 (Hold).

Key Picks in the Sector

Some better-ranked stocks in the medical sector are Almost Family Inc. AFAM, Amedisys Inc. AMED and Boston Scientific Corp. BSX. All the three stocks hold a Zacks Rank #2 (Buy).

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BOSTON SCIENTIF (BSX): Free Stock Analysis Report
 
AMEDISYS INC (AMED): Free Stock Analysis Report
 
AMSURG CORP (AMSG): Free Stock Analysis Report
 
ALMOST FAMILY (AFAM): Free Stock Analysis Report
 
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