Odyssey Healthcare Inc. (ODSY), the hospice provider, saw revenue leap 63.7% in the fourth quarter after acquiring the VistaCare business in March 2008. The company has surprised on estimates 2 out of the last 4 quarters by an average of 31.49%. Analysts expect 5-year earnings growth of 12%.

Company Description

Odyssey Healthcare provides hospice care in more than 30 states for terminally ill patients and their families. ODSY offers pain management and addresses the psychological and spiritual needs of the patients and their families.

Odyssey uses nurses, doctors, home healthcare aides, social workers, chaplains, bereavement counselors and trained volunteers to provide care in patients’ homes, nursing homes or assisted living facilities.

Revenue Jumped 63.7% in the Fourth Quarter

On Feb 18, Odyssey Healthcare reported fourth quarter earnings which met analysts’ estimates. Net income was $5.4 million, or 16 cents per share, compared with $1.2 million, or 4 cents per share, in the year ago period. Adjusted EPS were 17 cents.

Net patient service revenue for the fourth quarter surged 63.7% to $167.3 million from $102.2 million in 2007. For the year, net patient service revenue grew 54.7% to $616 million from $398.2 million in full-year 2007. The fourth quarter results included the operations of VistaCare, which was acquired in March 2008.

“We had good admission growth during the fourth quarter with admissions volume increasing by 1.6% over the third quarter of 2008,” said Robert A. Lefton, president and chief executive officer.

“This growth, however, was offset by an increase in our discharge rate, which spiked toward the end of the fourth quarter.”

“The net effect of the increase in our admissions and discharges resulted in a slight increase in our average daily census to 12,357 for the fourth quarter of 2008 as compared with 12,329 for the third quarter of 2008,” he added.

Consensus Estimates Rise

Given the company’s fourth-quarter results, covering analysts are bullish about the first quarter and full-year 2009. First-quarter estimates rose 3 cents to 21 cents in the last week. Full year estimates climbed 8.1% to 80 cents from 74 cents in the last 7 days.

“ODSY 4Q08 financial results were in line with expectations and included operations of VistaCare, which was acquired in March 2008,” said Zacks Equity Analyst Chris Kallos in a Feb 19 Research Report.

“We are encouraged by the progress to date of the integration of the Vistacare acquisition and believe the recent BNAF related Medicare reimbursement phase out reprieve announced in the stimulus package is positive for the stock. We retain our Hold rating at current levels.”

Value Fundamentals

Odyssey Healthcare is a Zacks #1 Rank (strong buy) stock. The Zacks Recommendation is a Hold. The Zacks Rank is most effective over a shorter time period whereas the Zacks Recommendation considers a longer time horizon.

ODSY is trading with a forward P/E of 12.3. It has a price-to-book of 1.87. The company also has a stellar 5-year average return on equity (ROE) of 15.30%.

Zacks Investment Research
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