By Ben Levisohn
Envision Healthcare dropped 6.3% to $65.59 today, while the S&P 500 climbed 1.4% to 2,395.96.
Barclays analyst Joshua Raskin and team write that “last night was the first bump in that road” but kept their Overweight rating on Envision,w which completed its merger with AmSurg in December. They explain why:
Over the past two decades we have seen many transformational deals in healthcare
services. A large majority of them get off to difficult starts. But then there is the bifurcation. Some transactions continue to pressure the purchaser (Davita (DVA) and Healthcare Partners for example), while others reset the expectations and then reap significant long term benefits (CVS (CVS) and Caremark for example). The weaker outlook for the newly combined Envision was not entirely a surprise in light of the magnitude of the merger. The real question becomes – does the management team fully understand the magnitude of the weakness, the drivers of the weakness and are those now included in guidance for the future. We are confident that the combined entity will generate cost synergies as well as revenue opportunities that were not available to either of the legacy entities. We believe that the remaining segments, after a portfolio review that is leading to expected divestitures, will be solid growth businesses. We simply acknowledge that the path to that higher earnings base may be volatile, and last night was the first bump in that road.
Envision Healthcare’s market capitalization fell to $7.7 billion today from $8.2 billion yesterday.
The Biggest Loser: Envision Healthcare Tumbles 6.3% – Stocks to Watch