Emergency Medical Services Corp. (EMS) reports fourth-quarter and 2009 results on Feb 11, with the current Zacks Consensus Estimate for the quarter and full year at 63 cents and $2.51 per share, respectively. With respect to recent estimate revisions, one of the 10 analysts covering the stock has raised estimates for the fourth quarter and full year by a penny over the last 30 days.
Going by the past trend, Emergency Medical has consistently surpassed expectations. Emergency Medical had a positive surprise of 10% and 29% in the third and second quarters of fiscal 2009, respectively, with the four-quarter average of positive 14.4%. This means that, on an average, the company has come ahead of the Zacks Consensus by 14.4% over the last four quarters.
Emergency Medical’s outlook remains promising given the favorable industry dynamics. Outsourcing of emergency services is being increasingly encouraged by government agencies and healthcare facilities, allowing them to reduce costs without compromising on quality. Given these factors, we have upgraded the stock to Outperform.
For 2010, the current Zacks Consensus Estimate is $2.93, representing approximate growth of 16.7%. Estimates for 2010 have been on the rise with 4 of 10 analysts covering the stock increasing their estimates over the past 30 days.
Emergency Medical has two operating subsidiaries – American Medical Response, its healthcare transportation services segment and EmCare Holdings, its outsourced hospital-based physician services segment. These two segments accounted for approximately 51% and 49%, respectively, of total revenues during the third quarter of 2009. The company has performed well in both the segments, a trend that we expect to continue with increased volume from new contracts, suitable acquisitions, better penetration in existing markets and operational efficiencies.
We are concerned about the regulatory challenges associated with Emergency Medical. The company earns a relatively high proportion of revenues from government-sponsored programs such as Medicare and Medicaid; these two accounted for 22.4% and 4.9% of net revenues during the third quarter of 2009, respectively. Any changes to government regulation in an effort to curb rising health care costs could have a negative impact on the company’s business. However, we believe, the increase in aging population will be a significant demand driver for healthcare services, thereby resulting in an increase in ambulance transport, emergency department visits and hospital admissions.
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