What the Hell Just Happened to Envision Healthcare Corporation (EVHC) and 3D Systems Corporation (DDD)? Analysts Weigh In

EVHC "dramatically" fails 3Q expectations; DDD merits a price target cut more than 50%.


Envision Needs to Scramble a Comeback

Envision Healthcare Corporation (NYSE:EVHC) dashed many investors’ hopes with not only a mostly anticipated third quarter miss, but a dismal fourth quarter guide for the year that has sent shares on a 32% crash in its wake.

Canaccord analyst Richard Close is not abandoning the bullish camp just yet- not until today’s conference call with the physician services provider, with Close asserting that far “more details [are] needed to quell concerns and instill confidence” after such a stark plummet in investor sentiment.

For now, the analyst stands by the company’s prospects down the road, arguing that “longer-term, EVHC is still the market leader and we would expect it to be able to maneuver through this challenging environment and drive shareholder returns.”

As such, the reiterates a Buy rating on EVHC stock with a $68 price target, which represents a 135% increase from where the stock is currently trading. (To watch Close’s track record, click here)

For the third quarter, EVHC posted $1.99 billion in revenue, underperforming by a hair the analyst’s $2.01 estimate and mirrored consensus of $1.99 billion. However, hurricane weather proved stormy for both revenue and adjusted EBITDA to the tune of $22 million. Envision’s adjusted EBITDA of $234 million heavily tripped up against its own guide of $266 to $278 million while stumbling 13.4% under the analyst’s expectations of $269 million and 12.5% short of the Street’s $267 million. With the storm impact added in, the analyst notes adjusted EBITDA would have hit roughly 5% under his projection for the quarter.

The real trouble brewed in the fourth quarter guide, with EVHC’s revenue guide of $1.88 to $2.02 billion shortchanging at the midpoint the analyst’s forecast by a 4% miss and consensus by 5%. Strikingly, the physician services provider’s adjusted EBITDA of $182 to $202 million, with $192 million at the midpoint underclassed the analyst’s estimate by a whopping 35% while missing consensus by 34%.

Close explains, “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.”

Regarding today’s conference call, “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,” surmises the analyst, keeping his eyes peeled to whether the company can rebound from such a “dramatically” massive underclass of expectations.

There are going to be a lot of disappointed bulls out today, considering this stock is well- liked by the Street, with TipRanks analytics exhibiting EVHC as a Strong Buy. Based on 11 analysts polled by TipRanks in the last 3 months, 9 rate a Buy on Envision stock while 2 maintain a Hold. The 12-month average price target stands at $63.33, marking a 119% upside from where the stock is currently trading.

3D Systems’ Challenging 3Q Showcase Sends This Analyst to the Sidelines

3D Systems Corporation (NYSE:DDD) has certainly rattled the Street today, with frustrated investors rushing off and shares on blast, nose diving 24%. This maker of 3-D printers has found itself not only on its third quarterly earnings misstep in a row, but the company missed in a big way: turning up losses per share where Wall Street had been waiting to see profits.

FBR analyst Christopher Van Horn determines that the company’s “near-term challenges [are] offsetting [its] long-term opportunity,” and unsatisfied with this latest earnings fiasco downgrades from a Buy to a Neutral on DDD stock while slashing the price target from $18 to $7, which represents a 25% decrease from where the stock is currently trading. (To watch Horn’s track record, click here)

Just how bad was 3D’s third quarter? Keep in mind that where the analyst projected $162.8 million in revenue, DDD came in below with $152.9 million; where the analyst projected $20.5 million in adjusted EBITDA, the company heavily undershot expectations with just $2.4 million; where the analyst called for 12.6% in EBITDA margin, 3D only realized 1.5%; and to add insult to injury, where Van Horn forecasted $0.13 in adjusted EPS, DDD fell into negative territory with -$0.09. The adjusted numbers do not take into account what Van Horn believes will be a one-time charge in COGS on back of inventory adjustment.

Profit and loss took a sharp hit in DDD’s earnings, with the analyst pointing to a negative mix in printers as a key culprit that took away from positive unit volumes as well as a momentum for a ramp-up in core SG&A spending riding a wave of subdued revenue. These three factors could translate to a prospective continuous headwind in the forthcoming quarters, wagers Van Horn.

Meanwhile, the DDD team took its guidance off the table, and Van Horn ventures this kind of “uncertainty” may put shares even more under pressure. The analyst underscores that the root of the problem does not bode well for the company: “We believe that DDD’s primary reason for withdrawing guidance is an increased degree of unpredictability related to internal issues and associated costs, especially quality assurance problems that have come to light in recent quarters. Without management guidance we think that the markets could take a conservative approach to valuations.”

Van Horn continues, “DDD’s opportunity for near-term revenue expansion appears to be somewhat lower than our prior expectations due to somewhat negative mix and a highly competitive marketplace (a headwind for pricing). In addition, the uncertainty regarding legal action from the Department of Commerce could put pressure on earnings, which creates additional headwinds. However, and perhaps more importantly, negative mix, tight competition, and heightened OpEx spend (in support of future growth), combine to meaningfully constrain DDD’s margin profile relative to our prior expectations.”

Ultimately, Van Horn concludes that “stepping back, we think that 3Q17 results exposed a variety of factors that could continue to weigh on DDD over the near term and warrant a significant reduction to our estimates,” landing him in a sudden stance of wariness on DDD’s now shaky future.

The FBR analyst is now in good company among a majority sidelined on the tech stock, with TipRanks analytics demonstrating DDD as a Hold. Out of 8 analysts polled by TipRanks in the last 3 months, 7 remain sidelined while 1 is bearish on the stock. With a return potential of 33%, the stock’s consensus target price stands at $12.67.