AdaptHealth Beats Estimates But Slips on Sales, Analysts See Demand Headwinds Ahead
AdaptHealth Corp. (NASDAQ:AHCO) has announced its first-quarter 2025 financial results, surpassing Wall Street’s revenue expectations despite a 1.8% year-on-year decline to $777.9 million. However, the company’s full-year revenue guidance of $3.25 billion at the midpoint came in 0.5% below analysts’ estimates, and its GAAP loss of $0.05 per share was significantly below consensus estimates.
Revenue and Earnings Performance
AdaptHealth’s Q1 CY2025 highlights reveal a mixed bag of results:
- Revenue: $777.9 million vs analyst estimates of $764.8 million (1.8% year-on-year decline, 1.7% beat)
- EPS (GAAP): -$0.05 vs analyst estimates of $0.03 (significant miss)
- Adjusted EBITDA: $127.9 million vs analyst estimates of $127.3 million (16.4% margin, in line)
The company has dropped its revenue guidance for the full year to $3.25 billion at the midpoint from $3.29 billion, a 1.2% decrease.
Guidance and Market Performance
AdaptHealth’s EBITDA guidance for the full year is $685 million at the midpoint, in line with analyst expectations. Operating Margin stands at 3%, down from 6.4% in the same quarter last year. Free Cash Flow was -$58,000 compared to -$38.86 million in the same quarter last year.
Market Capitalization has reached $1.17 billion, and AdaptHealth’s CEO, Suzanne Foster, said, "Amid elevated uncertainty in the external environment, we at AdaptHealth have stayed the course, with a relentless focus on improving our business and providing exceptional service to the 4.2 million patients that depend on us."
Company Overview
With approximately 680 locations serving patients across all 50 states, AdaptHealth provides home medical equipment, supplies, and related services to patients with chronic conditions like sleep apnea, diabetes, and respiratory disorders.
Sales Growth
Examining a company’s long-term performance can provide clues about its quality. Any business can have short-term success, but a top-tier one grows for years. Thankfully, AdaptHealth’s 40.1% annualized revenue growth over the last five years was incredible. Its growth beat the average healthcare company and shows its offerings resonate with customers.
Quarterly Revenue and Year-On-Year Growth
AdaptHealth’s recent performance shows its demand has slowed significantly as its annualized revenue growth of 3.9% over the last two years was well below its five-year trend. This quarter, AdaptHealth’s revenue fell by 1.8% year on year to $777.9 million but beat Wall Street’s estimates by 1.7%.
Looking Ahead
Sell-side analysts expect revenue to grow 1.9% over the next 12 months, a slight deceleration versus the last two years. This projection is underwhelming and implies its products and services will see some demand headwinds.
Generative AI Impact on AdaptHealth
Unless you’ve been living under a rock, it should be obvious by now that generative AI is going to have a huge impact on how large corporations do business. While Nvidia and AMD are trading close to all-time highs, we prefer a lesser-known (but still profitable) stock benefiting from the rise of AI.
Operating Margin and Earnings Per Share
Operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses – everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.
AdaptHealth was profitable over the last five years but held back by its large cost base. Its average operating margin of 1.2% was weak for a healthcare business. On the plus side, AdaptHealth’s operating margin rose by 1.5 percentage points over the last five years, as its sales growth gave it operating leverage.
Conclusion
AdaptHealth has had a mixed quarter, beating analyst estimates on revenue but missing on EPS and lowering its full-year guidance. While the company’s long-term growth is encouraging, its recent performance shows demand headwinds ahead. Investors should consider AdaptHealth’s business quality and valuation when deciding whether to invest in this stock.