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Can RadNet's (RDNT) Service Fee Revenues Help Lift Q2 Earnings?
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RadNet, Inc. (RDNT - Free Report) is set to release results for the second quarter of 2024 on Aug 8 before the opening bell.
The medical diagnostic imaging service provider posted adjusted earnings of 7 cents per share in the last reported quarter compared to the Zacks Consensus Estimate of a loss of 9 cents. The company topped earnings estimates in the trailing four quarters, the average surprise being 158.95%.
Q2 Estimates
For the second quarter of 2024, the Zacks Consensus Estimate for RadNet’s revenues is pegged at $437.3 million, an increase of 8.3% from the year-ago reported figure.
The Zacks Consensus Estimate for the company’s earnings is pegged at 16 cents per share, which indicates a 33.3% decline from the year-ago reported figure.
Estimate Revision Trend Ahead of Earnings
Estimates for RadNet’s Q2 earnings have remained unchanged at 16 cents per share in the past 30 days.
Let’s briefly examine the company’s performance leading up to this announcement.
Imaging Center
On the first-quarter earnings call, management stated that the segment’s revenues were boosted by improved reimbursements from commercial and capitated payors, who view the company as a lower-priced alternative to hospital-based imaging. The Zacks Consensus Estimate for RadNet’s Revenue under Capitation Arrangements indicates an 11% decrease year over year in the second quarter of 2024.
Meanwhile, the business is likely to have seen robust demand for the services in virtually all of the company’s core markets. RadNet may have benefitted from the increasing utilization of diagnostic imaging within health care and the growing trend of steering procedural volumes from more expensive hospital settings to cost-efficient ambulatory sites, like the ones it operates.
Furthermore, the broader market trend shows that the ongoing shift in modality mix toward advanced imaging, MRI, CT and PET/CT generates higher revenue per scan than routine imaging. This is expected to have boosted the company’s second-quarter revenues, further supported by its significant investments in advanced imaging equipment for growth and upgrades.
Additionally, a crucial part of RadNet's growth strategy has been investing in tuck-in deals. In April 2024, the company marked its entry into the greater Houston metropolitan area with the acquisition of the seven imaging centers of Houston Medical Imaging. Earlier in the year, it acquired assets of Antelope Valley Outpatient Imaging and Grossman Imaging Center, which are likely to have a positive impact on the company’s revenues in the to-be-reported quarter. Meanwhile, RadNet announced another transaction involving the purchase of the assets of six imaging centers in Houston, TX, in April.
The company is also likely to have benefitted from its expanding joint venture (JV) businesses, with some of the largest health systems, such as Cedars-Sinai, RJWBarnabas and MemorialCare, being its JV partners. During the second quarter, RadNet established its second JV with Providence Health System in South California to enhance patient access to outpatient radiology by expanding the ambulatory network of imaging centers, including in underserved communities.
Earlier in January, the company’s JV with Dignity Health (named Arizona Diagnostic Radiology Group) acquired seven outpatient imaging centers in Phoenix, AZ. These positive developments are expected to have contributed to RadNet’s top-line growth in the second quarter.
Digital Health
Effective Jan 1, 2024, the company’s eRAD and DeepHealth operating system software businesses were combined with its AI segment to form the new Digital Health segment. In the second quarter, the division’s revenues may have been driven by the AI business, having surged remarkably by 118.8% year over year in the first quarter. Furthermore, the robust performances of these higher profit-margin businesses are likely to have factored into the company’s adjusted EBITDA growth.
RadNet may have continued to sell, service and support eRAD solutions to new and existing customers, simultaneously making hefty R&D investments in developing the DeepHealth OS cloud-based operating system and generative AI modules. Management perceives these can potentially reduce costs and increase efficiency in the areas of patient scheduling, preauthorization, insurance verification, and revenue cycle management and analytics.
In addition, the EBCD (Enhanced Breast Care Detection) breast cancer screening AI-powered initiative is expected to have contributed to the segment’s growth. The company is likely to have continued rolling out the screening mammography service in Central and Northern California. RadNet registered significantly higher initial adoption rates in Southern California, where it is now fully implemented, while adoption in the East Coast may have risen steadily as well.
Additionally, the AI segment subsidiaries, Aidence and Quantib, have been expanding their customer base predominantly in Europe. All these developments are also expected to have positively impacted the company’s top-line performance in the to-be-reported quarter.
Overall, the Zacks Consensus Estimate indicates that RadNet’s Service fee revenues are likely to improve by 10.9% from the comparable 2023 period.
However, the escalating cost of operations may have weighed on the company’s profitability. Like its industry peers, RadNet, too, has been facing inflation in employee wage rates due to competition in a tight labor market. Additionally, an increased headcount related to the commercialization of the initial AI products is likely to have incurred higher salary expenses. We expect these factors to have pushed up operating expenses for the company and eventually result in a dismal bottom-line performance for the second quarter.
What Our Model Suggests
Per our proven model, a stock with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold), along with a positive Earnings ESP, has a higher chance of beating estimates, which is not the case here, as you can see.
Earnings ESP: RadNet has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: The company currently carries a Zacks Rank #4 (Sell).
Stocks Worth a Look
Here are some medical stocks worth considering, as these have the right combination of elements to post an earnings beat this time:
HIMS’ earnings surpassed estimates in three of the trailing four quarters and missed once, with the average surprise being 79.17%. The Zacks Consensus Estimate for the company’s second-quarter EPS is expected to surge 266.7% from the year-ago quarter figure.
Owens & Minor (OMI - Free Report) has an Earnings ESP of +1.54% and a Zacks Rank #2. The company is slated to release second-quarter 2024 results on Aug 2.
OMI’s earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 11.99%. The Zacks Consensus Estimate for Owens & Minor’s second-quarter EPS is expected to surge 83.3% from the year-ago quarter figure.
Penumbra (PEN - Free Report) has an Earnings ESP of +0.08% and a Zacks Rank #2. The company is slated to release second-quarter 2024 results on Jul 30.
The company’s earnings surpassed estimates in three of the trailing four quarters and missed in one, with the average surprise being 25.97%. The Zacks Consensus Estimate for PEN’s 2024 second-quarter EPS is expected to improve 30.2% from the year-ago reported figure.
Image: Bigstock
Can RadNet's (RDNT) Service Fee Revenues Help Lift Q2 Earnings?
RadNet, Inc. (RDNT - Free Report) is set to release results for the second quarter of 2024 on Aug 8 before the opening bell.
The medical diagnostic imaging service provider posted adjusted earnings of 7 cents per share in the last reported quarter compared to the Zacks Consensus Estimate of a loss of 9 cents. The company topped earnings estimates in the trailing four quarters, the average surprise being 158.95%.
Q2 Estimates
For the second quarter of 2024, the Zacks Consensus Estimate for RadNet’s revenues is pegged at $437.3 million, an increase of 8.3% from the year-ago reported figure.
The Zacks Consensus Estimate for the company’s earnings is pegged at 16 cents per share, which indicates a 33.3% decline from the year-ago reported figure.
Estimate Revision Trend Ahead of Earnings
Estimates for RadNet’s Q2 earnings have remained unchanged at 16 cents per share in the past 30 days.
Let’s briefly examine the company’s performance leading up to this announcement.
Imaging Center
On the first-quarter earnings call, management stated that the segment’s revenues were boosted by improved reimbursements from commercial and capitated payors, who view the company as a lower-priced alternative to hospital-based imaging. The Zacks Consensus Estimate for RadNet’s Revenue under Capitation Arrangements indicates an 11% decrease year over year in the second quarter of 2024.
Meanwhile, the business is likely to have seen robust demand for the services in virtually all of the company’s core markets. RadNet may have benefitted from the increasing utilization of diagnostic imaging within health care and the growing trend of steering procedural volumes from more expensive hospital settings to cost-efficient ambulatory sites, like the ones it operates.
Furthermore, the broader market trend shows that the ongoing shift in modality mix toward advanced imaging, MRI, CT and PET/CT generates higher revenue per scan than routine imaging. This is expected to have boosted the company’s second-quarter revenues, further supported by its significant investments in advanced imaging equipment for growth and upgrades.
RadNet, Inc. Price and EPS Surprise
RadNet, Inc. price-eps-surprise | RadNet, Inc. Quote
Additionally, a crucial part of RadNet's growth strategy has been investing in tuck-in deals. In April 2024, the company marked its entry into the greater Houston metropolitan area with the acquisition of the seven imaging centers of Houston Medical Imaging. Earlier in the year, it acquired assets of Antelope Valley Outpatient Imaging and Grossman Imaging Center, which are likely to have a positive impact on the company’s revenues in the to-be-reported quarter. Meanwhile, RadNet announced another transaction involving the purchase of the assets of six imaging centers in Houston, TX, in April.
The company is also likely to have benefitted from its expanding joint venture (JV) businesses, with some of the largest health systems, such as Cedars-Sinai, RJWBarnabas and MemorialCare, being its JV partners. During the second quarter, RadNet established its second JV with Providence Health System in South California to enhance patient access to outpatient radiology by expanding the ambulatory network of imaging centers, including in underserved communities.
Earlier in January, the company’s JV with Dignity Health (named Arizona Diagnostic Radiology Group) acquired seven outpatient imaging centers in Phoenix, AZ. These positive developments are expected to have contributed to RadNet’s top-line growth in the second quarter.
Digital Health
Effective Jan 1, 2024, the company’s eRAD and DeepHealth operating system software businesses were combined with its AI segment to form the new Digital Health segment. In the second quarter, the division’s revenues may have been driven by the AI business, having surged remarkably by 118.8% year over year in the first quarter. Furthermore, the robust performances of these higher profit-margin businesses are likely to have factored into the company’s adjusted EBITDA growth.
RadNet may have continued to sell, service and support eRAD solutions to new and existing customers, simultaneously making hefty R&D investments in developing the DeepHealth OS cloud-based operating system and generative AI modules. Management perceives these can potentially reduce costs and increase efficiency in the areas of patient scheduling, preauthorization, insurance verification, and revenue cycle management and analytics.
In addition, the EBCD (Enhanced Breast Care Detection) breast cancer screening AI-powered initiative is expected to have contributed to the segment’s growth. The company is likely to have continued rolling out the screening mammography service in Central and Northern California. RadNet registered significantly higher initial adoption rates in Southern California, where it is now fully implemented, while adoption in the East Coast may have risen steadily as well.
Additionally, the AI segment subsidiaries, Aidence and Quantib, have been expanding their customer base predominantly in Europe. All these developments are also expected to have positively impacted the company’s top-line performance in the to-be-reported quarter.
Overall, the Zacks Consensus Estimate indicates that RadNet’s Service fee revenues are likely to improve by 10.9% from the comparable 2023 period.
However, the escalating cost of operations may have weighed on the company’s profitability. Like its industry peers, RadNet, too, has been facing inflation in employee wage rates due to competition in a tight labor market. Additionally, an increased headcount related to the commercialization of the initial AI products is likely to have incurred higher salary expenses. We expect these factors to have pushed up operating expenses for the company and eventually result in a dismal bottom-line performance for the second quarter.
What Our Model Suggests
Per our proven model, a stock with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold), along with a positive Earnings ESP, has a higher chance of beating estimates, which is not the case here, as you can see.
Earnings ESP: RadNet has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: The company currently carries a Zacks Rank #4 (Sell).
Stocks Worth a Look
Here are some medical stocks worth considering, as these have the right combination of elements to post an earnings beat this time:
Hims & Hers Health (HIMS - Free Report) has an Earnings ESP of +19.28% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.The company is expected to release second-quarter 2024 results on Aug 5.
HIMS’ earnings surpassed estimates in three of the trailing four quarters and missed once, with the average surprise being 79.17%. The Zacks Consensus Estimate for the company’s second-quarter EPS is expected to surge 266.7% from the year-ago quarter figure.
Owens & Minor (OMI - Free Report) has an Earnings ESP of +1.54% and a Zacks Rank #2. The company is slated to release second-quarter 2024 results on Aug 2.
OMI’s earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 11.99%. The Zacks Consensus Estimate for Owens & Minor’s second-quarter EPS is expected to surge 83.3% from the year-ago quarter figure.
Penumbra (PEN - Free Report) has an Earnings ESP of +0.08% and a Zacks Rank #2. The company is slated to release second-quarter 2024 results on Jul 30.
The company’s earnings surpassed estimates in three of the trailing four quarters and missed in one, with the average surprise being 25.97%. The Zacks Consensus Estimate for PEN’s 2024 second-quarter EPS is expected to improve 30.2% from the year-ago reported figure.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.