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Amedisys (AMED) Strong on Home Health, Margin Decline a Woe

Zacks

On Feb 9, we issued an updated research report on Amedisys, Inc. AMED. The stock carries a Zacks Rank #3 (Hold).

The renowned home health and hospice services provider has been trading above the broader industry over the past six months. The stock has rallied 14.8% against the broader industry’s 1% decline.

Of late, the company has made a number of strategic acquisitions, the recent being Tenet Healthcare’s home health and hospice operations in Arizona, for a deal value of $20.5 million. Amedisys claims this buyout to be a strategic fit as it is likely to help the company provide high-quality post-acute services in the key markets. This consolidation might allow Amedisys to improve the delivery of care and patient management across the care continuum in these markets.


Amedisys’ Personal Care segment has been growing strong and stable on the latest integrated tuck-in acquisitions. Moreover, the company is upbeat about bountiful prospects in this segment. In October 2017, Amedisys announced that its subsidiary, Associated Home Care, completed the buyout of Intercity Home Care, a personal care provider headquartered in Malden, MA.

Also, a favorable 2018 Home Health Final Rule buoys optimism. Per a report by HEALTHCAREfirst, the rule was finalized without implementing the Home Health Groupings Model scheduled for rollout in 2019.

Meanwhile, Amedisys is poised to benefit from the aging demographics of the U.S. population and the need for higher acuity patients in a home nursing environment. Moreover, the company’s strong cash balance position bolsters investors’ confidence in the stock.

On the flip side, escalating operating expenses and declining gross margin continue to raise concerns. Also, an intensely competitive landscape and regulatory concerns weigh on the home health and hospice industry.

Key Picks

Some better-ranked stocks in the broader medical sector are PerkinElmer PKI, Bio-Rad Laboratories BIO and Becton, Dickinson and Company BDX.

PerkinElmer has a long-term expected earnings growth rate of 12.3%. The stock carries a Zacks Rank #2.

Bio-Rad Laboratories has a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.The company has a long-term expected earnings growth rate of 25%.

Becton, Dickinson and Company is a Zacks #2 Ranked player. The company has a long-term expected earnings growth rate of 13.3%.

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