Shares of MEDNAX Inc MD have recovered from their steep downturn in response to the company’s lower-than-expected fourth-quarter 2016 results. Although Street expectations do not appear “as ambitious as prior years,” the company’s organic growth is likely to be “underwhelming,” Baird’s Whit Mayo said in a report.
Mayo downgraded the rating on Mednax from Buy to Neutral, while maintaining the price target at $72. The analyst commented that his view on the risk/reward profile was “mixed.” The company’s shares are currently trading at a 20 percent to Envision Healthcare Corporation EVHC, which is “hard to overlook.”
Reasons For Downgrade
Mayo's reasons for the downgrade:
- Run-up in shares.
- Weak organic growth, with “proprietary birth data” indicating “worsening trends.”
- High relative valuation.
- “2017 sets up to be overly reliant on M&A.”
Birth Trends Decelerate
The analyst mentioned four macro trends that were adversely impacting U.S. birth trends:
- Women are waiting longer and having fewer babies.
- While women over 30 years of age are having more babies, “the declines in the 20–29 categories more than offsets the older cohort increases.”
- Teen pregnancies have declined by nearly 50 percent since 2007.
- A decade of decline in pre-term rates.
Related Links:
MEDNAX Announces Acquisition of Multi-Specialty Practice in Texas
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