RE:RE:Here are some recent CRH Medical Corporation analyst reportsHere is the response from TD reducing target to $4.00
Event This morning, CRH pre-announced its Q3/17 results citing a combination of: (i) soft payer mix, and (ii) hurricane disruption. The revised revenue and Adj. EBITDA (to shareholders) guidance of $22.7mm and $7.3mm reflects shortfalls of ~4% and ~5%, respectively, relative to Q3/17 consensus. Management also announced the acquisition of a 51% interest in a North Carolina anesthesia practice with revenues of $5.3 million. Management stated that the transaction was expected to be accretive to EBITDA and cash flow. Additional details were not provided. CRH's prior transactions were completed in the 4.0x-5.0x EV/ EBITDA range. Impact: NEGATIVE U.S. Insurance Market Dynamics Roil Q3 - The softer-than-expected "commercial participation" dynamic in Q3 appears to be a continuation of the Q2 situation. We believe the trend is a result of the higher deductible environment that pertains in the U.S. This high deductible trend is part of the broader flux that is ongoing in the U.S. healthcare environment. We believe that there is limited visibility into final outcomes. Our 2017 Revisions — We are revising our Q3/17 revenues to $22.7mm from $25.6mm, and our 2017 revenues to $97.7mm from $100.6mm. We also revised our overall Adj. EBITDA to $10.1mm from $13.5mm. Changes include: 1) a reduction in commercial volumes in Q3 and Q4; 2) hurricane-related disruption limited to Q3; as well as 3) the North Carolina acquisition announced today.
TD Investment Conclusion We are reducing our target price to $4.00 from $5.50, to reflect the reduced visibility in CRH's future payer mix, as well as updated USD/CAD FX rate. While CRH's acquisition track record reflects strong execution on the strategic front; we believe that uncertainty related to reimbursement and other market dynamics will form the dominant questions through year end. We are maintaining our HOLD rating in view of CRH's leadership position relative to continued positive demand trends, as well as CRH's healthy balance sheet position.