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Summary

  • The company beat consensus on both the top and bottom lines.
  • This reaffirms our thoughts that the company is a big benefactor of healthcare reform.
  • We thought that the company could easily grow faster than expectations thanks to payment parity.

Team Health Holdings (NYSE:TMH) spiked after beating 2Q earnings after beating consensus by over 15%. Shares are now up nearly 12% over the last month. 2Q EPS came in at $0.61 (beating $0.53 consensus) and revenue was $675 million (beating $650 million consensus).

The company provided a second half 2014 outlook that included revenues growing for full year 2014 by 13% to 14%, up from the previous 11% to 12% guidance. Driving the y/y revenue growth in 2Q and going forward is a decline in uninsured patients and contribution from Medicaid parity.

Shares are up over 53% since our article in September. At the time, we noted that the company should be one of the biggest benefactors of healthcare reform. We also noted that:

...another big positive for TMH is payment parity, where a provision in health care reform will require Medicaid to increase its payment rate for primary care physicians up to Medicare rate for 2013 and 2014. This is a big positive for TMH, which gets over 2 million Medicaid visits per year, and nearly 30% of these visits qualify for the increased payment rate.

The company guided for 2Q a benefit from the Medicaid parity program to come in between $32 million and $34 million.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

Source: Update: Team Health Holdings