ADEPTUS Blows Through Expectations

Adeptus Health (ADPT: $69, up $1)

1Q16 Results Blew Through Expectations
Thus far Adeptus has been a home run.  For the first quarter of 2016, revenues hit $113 million a 38% jump over last year.  Adeptus blew through expectations for profits of $0.40, reporting $0.47.  If first quarter results are any indication, there is much more excitement ahead.

The company now operates 90 emergency room centers, having open nine during the quarter.  But that is only part of the story.  Revenues from existing locations increased 12%.  In our basic report on Adeptus that we published on the first of this month, with the stock at $54, we pointed out the enormous earnings leverage from rising revenue per location.  This is well underway at the 81 established emergency centers.  Overall, the quarter deserves a grade of A+.

Management Guidance: Major Upward Revision
In the conference call, management made nothing short of a major upgrade in full year 2016 guidance, forecasting revenues of $635-$665 million (previous Wall Street consensus was $510 million) and profits of $2.50-$2.60 (previous consensus was  $2.47).  

There is a very clear message in this revised forecast.   First, we are looking for a big increase in new locations during the balance of the year with revenue growth accelerating to over 50% as a result.  It normally takes between 12-24 months for a new facility to reach profitability.  Thus, this year’s surge in new locations will translate into major benefits in 2017 and beyond.

Consensus estimates are now up to $2.63 for 2016 and $3.85 for next year
We love to find companies where consensus estimates are rising.  It is a great way to find investment winners.  In the case of Adeptus, they are rising rapidly.  Wall Street’s new love affair with Adeptus is moving so fast it is hard to appreciate.  We offer the table below in case there are any doubts.