"Hedgeye Healthcare analyst Tom Tobin is reiterating his SELL call on Mednax (MD) post their recent quarterly report," writes Hedgeye CEO Keith McCullough.
Here are the key takeaways from a recent institutional research note written by our Healthcare team:
"In terms of metrics, our Maternity Tracker continues to trend negative which resulted in -1.8% decline in NICU days for the quarter. The vRad narrative continues to disappoint, which we believe is now spearheading a quality dilution in the MD physician portfolio as they turn to brick and mortar radiology acquisitions. Radiology may present a green field opportunity for cheaper acquisition multiples compared to Anesthesiology (which remain elevated), but they are cheap for a reason."
4Q16 TAKEAWAYS
- Missed 4Q16 and guided below consensus for 1Q17 with much of the Q&A spent on radiology
- MD currently has 411 radiologists under vRad according to our data analysis which compares to "over 400 reading" and "500 contracted" according to management commentary on their earnings call
- Last quarter management said they had "nearly 400" reading radiologists and were on track for 500 contracted by year end
- With same unit volume down -0.7% overall, we estimate the non-maternity volume trend was +0.6%, a weak result
- As management highlighted, matching volume and staffing, particularly in radiology, is "hard"
- NICU margins are also impacted by weak volume high "fixed costs" in terms of staffing
- We assume acquisiton multiples remain high given management's comment that multiples remain "unchanged"
- On the 3Q16 earnings call vRad problems "...we hope will go away by the end of the year..."
- New on the 4Q16 earning call was that vRad, due to poor performance lost business, but is no longer "losing contracts"
