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Mednax (MD) Downgraded To 'Hold' By Deutsche Bank, PT Cut To $73

 May 04, 2012 01:04 PM


(By Balachander) Mednax Inc. (NYSE:MD) shares were downgraded to "Hold" from "Buy" and price target lowered to $73 from $81 by Deutsche Bank analyst Darren Lehrich.

"Our U/G last Oct was predicated on growth in the core business stabilizing in the 3% to 3.5% range, and much greater potential earnings upside / multiple expansion from an accelerating M&A trend," the analyst wrote.

Lehrich acknowledges that it is still early in MD's anesthesia M&A trajectory. "Yet, we fear the co's slower pace of deals, coupled with a change in the co's margin profile due to the mix of acquired businesses, will lead to less multiple expansion than originally thought," he said.

[Related -Stock Upgrades And Downgrades: BBBY, DD, LULU, MASI, PETM, RDC, SYY]

The analyst said YTD acquisition announcements are pacing below his original expectations. "The confluence of deal pacing, a slightly lower S-U growth outlook by mgmt (to +1.5% to +3.5% or down 100 bps from prior), and mix/margin issues – lead MD's Q2 guidance to imply pretty flat yoy EPS growth. We see this outlook as a real disappointment, and indicative of potentially weaker underlying trends."

"Key downside risks: Medicaid mix, pricing, timing of M&A. Key upside risks: pot'l for Medicaid PCP code changes, M&A, buyback," the analyst said.

Sunrise, Florida-based Mednax provides neonatal, maternal-fetal, other pediatric subspecialties, and anesthesia physician services in the United States and Puerto Rico.

The stock, which has been trading in the 52-week range of $58.48 to $75.86, fell 3.7 percent to trade at $64.69 on Friday.

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