Envision Healthcare Corporation (EVHC) Drops the Ball in Q3 Earnings and Guidance


It’s a rough day for Envision Healthcare Corporation (NYSE:EVHC) investors who saw the value of their shares plummet. The reason? The physician services firm reported earnings that missed expectations and offered a sales outlook that was well below Wall Street forecasts, sending shares plunging 35%.

Specifically, the company reported an adj-EBITDA of $234 million, below consensus estimates of $267 million and versus guidance of $266-$278 million. Most notably, adj-EBITDA guidance of $182-$202 million was 34% below consensus.

Envision CEO Christopher A. Holden commented, “During the third quarter of 2017, our organization responded to a number of challenges, ranging from hurricanes that impacted two of our key markets to continued deceleration of health sector utilization following two years of heightened demand driven by coverage expansion […] We are addressing these challenges. I’m proud of all of our clinical professionals and particularly those who were on the front line of providing care before, during and after the hurricanes, including our AMR emergency medical services. During the quarter, we made excellent progress on the conversion of our out-of-network services to participating, or in-network status, and we are advancing an organizational structure that will allow us to more effectively execute on the physician-centric strategy that we presented earlier this year.”

“Looking forward we are operating our business based on more recent utilization trends, and our guidance for the fourth quarter of 2017 reduces the assumptions for utilization of our services. Our organization has effectively managed through cycles, and we feel confident that our leading and diverse position as facility-based providers will continue to drive long-term growth and create value for health systems, providers, payors, patients and, ultimately, for our shareholders,” Holden added.

Canaccord analyst Richard Close opined, “A 3Q’17 miss was expected given the already soft volume environment and storms in Texas and Florida. However, the 4Q’17 guidance provided versus our estimates and cons. is alarming. The guidance contemplates further deterioration in ER volumes, flat (with 3Q’17) anesthesia rates, and higher than expected new contract start-up expenses. All in, these factors contribute to a 4Q’17 adj-EBITDA (at mid-point) guide ~35% below our estimate. If the 4Q’17 adj-EBITDA guide turns out to be the appropriate starting point as we look into 2018, we would find it challenging to continue recommending the stock.”

The analyst continued, “Based on the company’s performance and challenging market conditions, the Board is reviewing alternatives that could drive increased shareholder value. We do not expect to hear any specific details but are encouraged that the company understands that the need to address the poor operational results and evaluate strategies to deliver shareholder returns.”

Close rates Envision Healthcare shares a Buy with a price target of $68. (To watch the analyst’s track record, click here)

Overall, 2 research analysts have assigned a Hold rating and 9 research analysts have given a Buy rating to the stock. When considering if perhaps the stock is under or overvalued, the average price target is $63.40 which is 111% above where the stock opened today.

Envision Healthcare specializes in healthcare services. It provides a range of services including physician-led services, ambulatory surgery services, postacute care and medical transportation. It operates through the following segments: Physician Services, Medical Transportation, and Ambulatory Services.