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Will Expenses Hit Envision Healthcare (EVHC) Q2 Earnings?

Zacks

Envision Healthcare Corp. EVHC is scheduled to report second-quarter 2017 results on Aug 7, after market close.

Last quarter, this health services company performed in line with the Zacks Consensus Estimate. However, earnings declined 6.8% year over year due to an increase in expense, which outdid revenue growth.

The company does not have an impressive surprise history. It missed estimates in two the last four quarters. The average remains a negative earnings surprise of 2.27%. This is depicted in the graph below:

Envision Healthcare Corporation Price and EPS Surprise


Envision Healthcare Corporation Price and EPS Surprise | Envision Healthcare Corporation Quote

Let’s see how things are shaping up for this announcement.

Q2 Flashback

The company is likely to see lower revenues from its Ambulatory Services segment, which has been experiencing soft business volumes over the past few quarters.

Moreover, the company is reeling under escalating operating expenses for several quarters. Most alarming is the rate of increase of operating expense, which has overshadowded the revenue growth rate, thereby thwarting bottom-line growth. The same is expected to be seen in the to-be-reported quarter.

A huge debt load is also niggling Envision Healthcare. Its total debt has been swelling since 2013, leading to a spike in interest expense. This in turn will dent its operating margins.

We nevertheless, expect to see an increase in revenues from the company's Physician Services segment driven by synergy from recent acquisitions.

Earnings Whispers

Our proven model does not conclusively show that Envision Healthcare is likely to beat on earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is not the case here as you will see below.

Zacks ESP: Envision Healthcare has an Earnings ESP of 0.00%. This is because the Most Accurate estimate of 75 cents per share is in line with the Zacks Consensus Estimate. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Envision Healthcare carries a Zacks Rank #4 (Sell). We caution against Sell-rated stocks (Zacks Rank #4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks That Warrant a Look

Here are some companies that you may consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Agios Pharmaceuticals, Inc. AGIO will report second-quarter 2017 earnings results on Aug 8. It has an Earnings ESP of +1.99% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Tenet Healthcare Corp. THC has an Earnings ESP of +5.88% and a Zacks Rank #3. The company is expected to report second-quarter earnings results on Aug 7.

Arena Pharmaceuticals, Inc. ARNA has an Earnings ESP of +5.88% and a Zacks Rank #2. The company is expected to report second-quarter earnings results on Aug 7.

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