Amedisys’ AMED growth in the third quarter of 2024 was driven by its continuously improving clinical quality for patients, demonstrated through high Quality of Patient Care and Patient Satisfaction star ratings. The company’s anticipated merger with UnitedHealth Group’s Optum is expected to generate significant synergies. However, a dull macroeconomic scenario and fierce competitive pressure may restrict Amedisys’ growth potential.

In the past year, this Zacks Rank #3 (Hold) company’s shares have lost 4.3% against the industry’s 9.6% growth and the S&P 500 composite’s 25.8% increase.

The leading home health and hospice services provider has a market capitalization of $2.95 billion. Amedisys has an earnings yield of 4.9%, much higher than the industry’s 4.1%. 

Tailwinds for AMED Stock

Selloff Decision, A Strategic Pact: In June 2023, Amedisys announced that it received an unsolicited proposal from UnitedHealth Group’s Optum — a diversified health services company — to acquire all of the outstanding shares of Amedisys’ common stock in an all-cash transaction for $101 per share. Combining Optum's extensive value-based care knowledge with Amedisys' dedication to quality and care innovation in the home and its employees' patient-first culture can significantly enhance the health outcomes and experiences of more patients at lower costs, resulting in continuous growth.

Efforts to Improve Clinical Quality: Amedisys’ focus on clinical distinction is demonstrated through its Quality of Patient Care and Patient Satisfaction star ratings. In the Centers for Medicare and Medicaid Services’ reports for the October 2024 Final release, the Quality of Patient Care star average across all Amedisys providers was 4.24, with 89% of its care centers at 4+ Stars and 56% at 4.5+ Stars.  Amedisys’ Patient Satisfaction star average for the October 2024 release was 3.78, outperforming the industry. The company aims to achieve a 4.0 Quality of Patient Care star rating for all its care centers. It has implemented targeted action plans to continue to improve the quality of care for patients and further its culture of quality.

Headwinds for AMED Stock

Macroeconomic Pressure on Business Operations: With escalating conflicts in the Middle East, Ukraine and other geopolitical tensions creating volatility in the global financial markets, these issues are likely to cause severe disruptions in the global supply chain and energy markets. 

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Furthermore, inflation has increased steadily throughout the United States. Amedisys anticipates these pressures to persist throughout 2024. As a recent example, the company reported a $43.3 million increase in general and administrative expenses in the third quarter of 2024. This was largely due to planned wage increases, higher health insurance costs, and increased legal and IT-related expenditures. 

Competitive Landscape: The market for home health and hospice is fragmented with several small local providers. With a few barriers to entry in this market, Amedisys primarily faces tough competition from local privately and publicly-owned, and hospital-owned healthcare providers. It competes based on the availability of personnel, the quality of services, the expertise of visiting staff and the price of services. 

Amedisys’ Estimates Trend

The Zacks Consensus Estimate for 2024 earnings per share has moved south 1.8% to $4.45 in the past 30 days.

The Zacks Consensus Estimate for 2024 revenues is pegged at $2.35 billion, indicating a 5% rise from the year-ago reported number.

Key Picks

Some better-ranked stocks in the broader medical space are Omnicell OMCL, Penumbra PEN and ResMed RMD.

Omnicell has an earnings yield of 3.7% compared to the industry’s 9.5%. Its earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 121.74%. OMCL’s shares have risen 3.6% compared with the industry’s 19.9% growth in the past year.

OMCL carries a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Penumbra, carrying a Zacks Rank #2 (Buy) at present, has an estimated 2024 earnings growth rate of 33.5% compared with the industry’s 15.9%. Shares of Penumbra have risen 3.2% compared with the industry’s 14.5% growth in the past year. PEN’s earnings surpassed estimates in three of the trailing four quarters and missed in one, the average surprise being 10.54%.

ResMed, carrying a Zacks Rank #2 at present, has an estimated earnings growth rate of 8.9% for fiscal 2025. Its shares have surged 115.8% compared with the industry’s 32.2% growth in the past year. RMD’s earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 6.41%. 

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