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Air Methods Corp (AIRM): For This Stock, It Is Hold or Get Ready to Move In

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Air Methods Corp (NASDAQ:AIRM) is a global leader in air medical transportation and has been in the business for three decades. The company has more than 300 operation bases serving 48 states, in addition to eight maintenance centers and a national communications center. The firm’s stock has been undergoing heavy selling, and there are signs that the stock is oversold at this point.

Air Methods Corp (NASDAQ:AIRM) shares closed on June 26, 2013 trading at $34.95. The heavy selling of the firm’s shares by investors can be attributed to the company’s poor performance in the first quarter of 2013, particularly the dismal $0.16 net loss per share posted compared to analysts’ estimates of an earnings per share of $0.32. The stock’s 52-week high stands at $50.61, while its 52-week low is $35.19. That’s a clear sign that the stock is currently oversold. You can get a good picture of whether this stock is overvalued by looking at how related industries are performing. The company accounts for 1.99% of S&P’s Small-Cap Health Care Portfolio, which is currently on an upward trend.

Compare the firm’s stock with close competitors like UnitedHealth Group Inc. (NYSE:UNH), which is trading at $64.78 and steadily climbing since March, and Express Scripts Holding Company (NASDAQ:ESRX), which is trading at $61.38 and also climbing since May. These two medical services companies are much larger than Air Methods Corp (NASDAQ:AIRM), with market caps of $67.4 billion for UnitedHealth Group Inc. (NYSE:UNH) and $50.78 billion for Express Scripts Holding Company (NASDAQ:ESRX) compared to just $1.4 billion for Air Methods Corp (NASDAQ:AIRM). Despite this, they are Air Methods’ biggest competitors in its market segment.

Recently, UnitedHealth Group was in the news as community leaders in Santa Fe and Las Cruces celebrated the official grand opening of two rental housing developments. The rental housing developments are the products of UnitedHealth Group Inc. (NYSE:UNH)’s $22 million investment in collaboration with a leading advocate for affordable housing, Enterprise Community Investment. There is also an additional housing development being undertaken in Deming – all thanks to the same collaboration.

Express Scripts Holding Company (NASDAQ:ESRX) witnessed an increase of +1.21% in the early part of June after S&P lifted the firm’s outlook from Negative to Stable. The firm was recently rated as the no. 49 most-shorted Nasdaq 100 component, a spot formerly occupied by Viacom, Inc. (NASDAQ:VIA) which is now in spot no. 62. On June 27, 2013, it became the day’s featured Health Services winner as it rose 1.2% to $62.11 per share on light volume.

Air Methods’ earnings estimates

Current Qtr.

06/2013

Next Quarter

09/2013

Current Year

12/2013

Next Year

12/2014

Average Estimate 0.56 0.84 1.90 2.84
Low Estimate 0.40 0.72 1.66 2.31
High Estimate 0.73 0.95 2.20 NA
Year Ago EPS 0.83 0.71 2.41 1.90
EPS Growth -31.77% 18.32% -21.24% 49.47%

The negative growth for the current quarter and the current year are based on comparable periods in 2012.

Air Methods numbers – Inclement weather to blame for a dismal performance

Air Methods Corp (NASDAQ:AIRM) released its first quarter 2013 results on Mar. 31, 2013; they were lower than expected and mainly attributable to foul weather. Revenues for the quarter fell 6% to $179.2 million compared to the previous quarter’s revenues of $190.8 million. The company posted a net loss of $5.7 million in the period, or $0.15 net loss per share. These results represent a considerable drop from the first quarter of 2012 when the company recorded a $12.5 million net profit, or $0.32 earnings per diluted share. Compare that to average analysts’ estimates of $0.32 earnings per diluted share. Air Methods’ 2013 results include the results for Sundance Helicopters which it acquired on Dec. 31, 2012. Sundance posted revenues of $10.4 million in the first quarter of 2013 and a pre-tax profit of $ 0.1 million. From these figures, it is clear that Sundance did not play a big role in the firm’s poor performance since its revenues account for just 5.8% of total revenues.

Air Methods Corp (NASDAQ:AIRM) makes the bulk of its revenues from airlifting patients from hospitals. Community-based transports stood at 11,845 for the quarter, representing a 7% decrease compared to the previous quarter. Same-base transports fell 9% to 1,081. Cancellations due to bad weather shot up by 427 transports. Requests by customers for community-based services for bases that are open for more than one year fell by 6%. Flight hours fell 5%. Net revenues per community-based transport fell by 10% to $9,098 from the previous quarter’s $10,072. The shortfall was attributed to deterioration in payer mix, although this was partially aircraft and helicopters offset by increased prices. Maintenance expenses for the firm’s fleet of 400 fixed-wing aircraft and helicopters were kept reasonably low, and grew by just $0.5 million – a 2% rise from the previous quarter’s levels. Fuel expenses per flight hour, however, shot up whopping 19% compared to the previous quarter.

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