Emergency Medical Beats, Raises - Analyst Blog

Emergency Medical Services' (EMS) fourth earnings per share came (EPS) in at 67 cents (excluding a tax benefit of 8 cents), which surpassed the Zacks Consensus Estimate of 63 cents and earnings of 48 cents from the year-ago period.

The company reported revenues of $654.3 million, a 10.2% increase compared to the fourth quarter of 2008. The robust performance during the quarter was primarily driven by increased volume arising from new contracts, higher revenues from existing contracts, lower operating expenses and fuel costs offset by increased compensation and insurance expense.

For the full year of 2009, Emergency Medical reported revenues and EPS of $2.57 billion and $2.64, respectively.

Emergency Medical operates two business segments: American Medical Response (AMR), its healthcare transportation services segment, and EmCare Holdings (EmCare), the outsourced hospital-based physician services segment. These two segments accounted for approximately 51% and 49%, respectively, of total revenues during the quarter.

The AMR segment generated revenues of $331.1 million, an increase of 2% compared to the fourth quarter of 2008. Revenues would have increased by 4% excluding the fourth quarter impact of FEMA hurricane deployment. The primary reason behind the increase has been an improvement in revenue per transport and growth in managed transportation business, offset partially by lower transports due to the company’s exit from underperforming markets.

The EmCare segment reported revenues of $321.2 million, an increase of 20.2% compared to the year-ago quarter. The addition of 74 net new contracts since Sep 30, 2008 and increased revenue from existing contracts were responsible for the improved performance of the segment.

Selling, general and administrative expenses declined to $16.3 million from $19 million in the year-ago period. While operating expenses remained unchanged, compensation and benefits increased 11.5%. At the end of 2009, Emergency Medical had $332.8 million in cash and cash equivalents while the company generated free cash flow of $52 million during the fourth quarter.

In addition, Emergency Medical provided guidance for 2010. The company expects EPS in the range of $3.00–$3.10, above the Zacks Consensus Estimate of $2.95.

We are quite optimistic about the future potential of the emergency medical services market as health authorities and government agencies are increasingly outsourcing these services for cost containment.
Moreover, the increase in the aging population will be a significant demand driver for healthcare services thereby, resulting in an increase in ambulance transports, emergency department visits and hospital admissions. We have an Outperform recommendation for the stock.

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