Companies highlighted in this Investment Idea include Chemed Corp. ( CHE), Odyssey Healthcare Inc. ( ODSY) and Emergency Medical Services Corp. (EMS).
Using the Zacks Rank, and understanding how it takes advantage of changes in estimates, can help investors receive insight on where a stock may be headed. Investors who want a broader picture can also take advantage of the Zack Industry Rank.
The Zack Industry Rank
The Zacks Industry Rank is based on the highly successful Zacks Rank indicator. As many of you already know, the Zacks Rank is our proprietary quantitative model that uses trends in earnings estimate revisions and EPS surprises to classify stocks into five groups:
#1 = Strong Buy
#2 = Buy
#3 = Hold
#4 = Sell
#5 = Strong Sell
Taking a look at the some of the stronger performing industries, the medical outpatient/home care industry stands out as a compelling investment idea. With a Zacks Industry Rank of 6 out of 217, it the highest ranked industry that offers the most companies.
The preceding 5 industries, which range from steel to retail, are generally volatile and are somewhat wild cards in this environment. Also, each of the 5 industries offers no more than 5 companies, versus 34 companies listed under the 6th ranked medical outpatient/home care industry.
Three companies within the medical outpatient/home care space are Chemed Corp. ( CHE), Odyssey Healthcare Inc. ( ODSY) and Emergency Medical Services Corp. (EMS). CHE and ODSY provide hospice services. EMS provides emergency medical services.
3 Bullish Plays
The hospice market has seen substantial growth, driven largely by an increasing awareness of hospice care and financial support under Medicare. Growth momentum should continue given the aging population and growing awareness.
Chemed Corporation (CHE), a Zacks #1 Rank (?strong buy?), operates in the healthcare field through its Vitas Healthcare Corporation (Vitas) subsidiary, and in the residential and commercial repair and maintenance service industry under the name Roto-Rooter. The company has evolved since its incorporation in 1970 through numerous acquisitions and divestments of diversified businesses. Vitas Healthcare Corporation (Vitas), based in Miami, Florida, is the nation?s largest provider of hospice services with about a 7% share of the U.S. hospice market. Vitas commenced operations in 1978 and incorporated in 1983 as a for-profit organization. Vitas Healthcare currently provides services to almost 9,000 patients from 44 hospice programs in 11 states. On October 21, the company announced 3Q08 financial results, posting earnings per share 79 cents. The result topped the consensus estimate by 4% and surpassed the year-prior total. Consolidated revenue from continuing operations jumped 6% year-over-year to $288.3M.
Odyssey HealthCare, Inc. (ODSY), one of only two publicly traded pure-play hospice providers, Odyssey was founded in 1995 and has since expanded rapidly. The company provides for all medical and psychosocial care, as well as certain other support services associated with patients terminal illnesses. Odyssey?s service offerings include Routine Home Care, General Inpatient Care, Continuous Home Care, and Respite Care. The bulk of Odyssey s revenues (greater than 90%) are derived from government reimbursements under Medicare and Medicaid. On October 28, ODSY announced 3Q08 financial results. The company reported earnings per share of 19 cents, topping the consensus estimate by 36% and surpassing the year-ago result. Consolidated net patient revenue in 3Q08 was $165.2M, up 65% year-over-year.
Emergency Medical Services Corporation (EMS) is a leading provider of emergency medical services in the United States operating under the AMR and EmCare brands. In FY07, AMR accounted for 57% of total revenues. Approximately 60% of AMR?s net revenue is currently generated from emergency 911 ambulance transport services. In FY07, EmCare accounted for 43% of total revenues. EmCare is the largest provider of outsourced emergency department staffing and related management services to healthcare facilities with an estimated 6% share of the total emergency department services market and a 9% share of the outsourced emergency department services market. On October 31, 2008, EMS announced 3Q08 earnings of 66 cents, nearly doubling the previous year?s 34 cents and exceeding analyst estimates by 47%. Net revenue totaled $679.3M, up 28.2% on a year-over-year basis.
Alex Kolb
Author Bio
Alex Kolb is a Growth Analyst at Zacks Investment Research covering Growth & Income stocks. He also contributes Investment Ideas to Zacks.com. For more information please visit http://www.zacks.com
