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Community Health (CYH): Why Is the Stock Losing Sheen?
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The stock of Community Health Systems, Inc. (CYH - Free Report) has been losing its sheen all through this year. Year to date, shares have lost value by 78.7% and have significantly underperformed the loss of 9.5% for the Zacks Medical Hospital industry. We also don’t expect any breather for the stock over the near term given the company-specific and regulatory challenges faced by it.
The stock price is reflective of the failure that some of its big acquisitions have seen. The company’s high debt level has been an eye sore for long. It is therefore resorting to a number of divestures to pay off its debt. The company’s debt level was at $15.1 billion as of Sep 30, 2016.
The company has been performing inconsistently over the past many quarters and the third quarter was simply not a good one. Operationally, the company experienced a great deal of changes over the past few quarters. Some of these changes are the recent spin-off of Quorum Health, a realignment of its divisions, a number of new division Presidents and Vice Presidents, the promotion of new Chief Operating Officer, consolidation on many of back office functions and IT conversions. Also, the assimilation of HMA hospitals has been more difficult than anticipated.
While the company believes all of the structural and managerial changes will ultimately lead to long-term success, some of these have created challenges for the near term.
For 2016 the company narrowed down its earnings expectation to a range of $0.30-$0.50 from the earlier estimate $1.40-1.90. The narrowed guidance was driven by disappointment in volumes and expense control.
The stock has also suffered immensely since Donald Trump won the election as he proposed the repeal of Obamacare. The company had gained under Obamacare as it witnessed a decline in the uninsured rate through Medicaid Expansion. Now, a repeal of the same will again lead to an increase in the uninsured rate which might hurt the company’s earnings.
The stock has also witnessed a decline in the Zacks Consensus Estimate. Earnings estimates for 2016 have plunged 95% to 7 cents per share over the past 60 days.
Other players in the same industry like LifePoint Health, Inc. , HCA Holdings Inc. (HCA - Free Report) and Tenet Healthcare Corp. (THC - Free Report) are also reeling under uncertainty over the disintegration of Obamacare under the new presidency.
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Community Health (CYH): Why Is the Stock Losing Sheen?
The stock of Community Health Systems, Inc. (CYH - Free Report) has been losing its sheen all through this year. Year to date, shares have lost value by 78.7% and have significantly underperformed the loss of 9.5% for the Zacks Medical Hospital industry. We also don’t expect any breather for the stock over the near term given the company-specific and regulatory challenges faced by it.
The stock price is reflective of the failure that some of its big acquisitions have seen. The company’s high debt level has been an eye sore for long. It is therefore resorting to a number of divestures to pay off its debt. The company’s debt level was at $15.1 billion as of Sep 30, 2016.
The company has been performing inconsistently over the past many quarters and the third quarter was simply not a good one. Operationally, the company experienced a great deal of changes over the past few quarters. Some of these changes are the recent spin-off of Quorum Health, a realignment of its divisions, a number of new division Presidents and Vice Presidents, the promotion of new Chief Operating Officer, consolidation on many of back office functions and IT conversions. Also, the assimilation of HMA hospitals has been more difficult than anticipated.
While the company believes all of the structural and managerial changes will ultimately lead to long-term success, some of these have created challenges for the near term.
For 2016 the company narrowed down its earnings expectation to a range of $0.30-$0.50 from the earlier estimate $1.40-1.90. The narrowed guidance was driven by disappointment in volumes and expense control.
The stock has also suffered immensely since Donald Trump won the election as he proposed the repeal of Obamacare. The company had gained under Obamacare as it witnessed a decline in the uninsured rate through Medicaid Expansion. Now, a repeal of the same will again lead to an increase in the uninsured rate which might hurt the company’s earnings.
The stock has also witnessed a decline in the Zacks Consensus Estimate. Earnings estimates for 2016 have plunged 95% to 7 cents per share over the past 60 days.
Community Health carries a Zacks Rank # 5 (Strong Sell). You can see the complete list of today’s Zacks #1 Rank stocks here.
Other players in the same industry like LifePoint Health, Inc. , HCA Holdings Inc. (HCA - Free Report) and Tenet Healthcare Corp. (THC - Free Report) are also reeling under uncertainty over the disintegration of Obamacare under the new presidency.
The Best Place to Start Your Stock Search
Today, you are invited to download the full list of 220 Zacks Rank #1 "Strong Buy" stocks – absolutely free of charge. Since 1988, Zacks Rank #1 stocks have nearly tripled the market, with average gains of +26% per year. Plus, you can access the list of portfolio-killing Zacks Rank #5 "Strong Sells" and other private research. See these stocks free >>