MEDNAX Inc. MD recently withdrew its initial guidance for the first quarter of 2020 and the full year due to the coronavirus or COVID-19 effect on global economy.
The global pandemic, as declared by the World Health Organization, took a toll on the market wherein MEDNAX is no exception.
For the first quarter, the company expects adjusted EPS in the band of 55-63 cents and adjusted EBITDA in the range of $90-$100 million. This guidance assumed total same-unit revenue growth for the three months ended Mar 31, 2020 in the bracket of 2-4%.
On a preliminary basis, the company estimated adjusted EBITDA to be $470 million at the midpoint, with a range of between $450 million and $490 million. Average diluted shares for the full year are expected to be approximately 85 million.
Rationale Behind the Withdrawal
The widespread novel coronavirus-led uncertainties might affect the company’s near-term financial performance.
Its January and February, results were in line with the guidance provided earlier. However, in March, the company’s clinical operations have been affected by lower patient volumes due to the evolving COVID-19 outbreak.
On closure of operating suites and facilities per federal advisories to cancel non-urgent procedures and prohibition of the same by certain states, the company’s American Anesthesiology medical group also took a hit. Decline in elective surgeries wherein MEDNAX-affiliated clinicians provide anesthesia services reduced.
Within its Radiology Solutions, orders for radiological studies also witnessed a downfall. Further, its office-based practises, such as maternal-fetal medicine, pediatric cardiology and numerous pediatric subspecialties saw appointment cancellations from historical normal levels.
As of now, the company does not anticipate any significant effect on it neonatal intensive care unit (NICU) patient volumes due to the COVID-19 situation.
MEDNAX took up several initiatives to help fight the ongoing challenge. Its American Anesthesiology organization mobilized many task forces to help the transition of care from surgical and non-surgical case volumes to critical and intensive care. Moreover, its Pediatrix-affiliated clinicians are providing adult care whereever needed.
MEDNAX Radiology Solutions physicians and leadership are enhancing remote capabilities for affiliated radiologists and also consulting with third parties on the expanded usage of chest imaging for COVID-19 diagnostic purposes.
The company believes that contractions in patient volume are a blip due to the global pandemic. MEDNAX expects most deferrals to cause a backlog of demand going forward, given the nature of services it provides.
Amendments to Credit Facility
The company’s balance sheet strength with moderate leverage and meaningful liquidity plus no-debt maturities until late 2023 impresses. Effective Mar 25, 2020, it amended its revolving-credit facility to dole out extra interim financial aid during these challenging times.
Zacks Rank and Price Performance
Shares of this Zacks Rank #4 (Sell) company have lost 55.7% in a year's time, wider than its industry's decline of 33%. The performance looks pale when compared with the price movement of other companies in the same space, such as HCA Healthcare, Inc. HCA, Tenet Healthcare Corporation THC and Universal Health Services, Inc. UHS, which have lost 28%, 36% and 33.8% in the same time frame.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.