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Community Health Sells Home Health Unit for Deleveraging
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As announced last October, Community Health Systems, Inc. (CYH - Free Report) has sold 80% ownership interest in its Home Health division to the subsidiary of Almost Family for $128 million. The Home Health business accounts for approximately $200 million of Community Health’s annual revenues.
This divesture is part of the company’s effort to generate funds to lower its debt level.
The stock of Community Health gave a lackluster performance last year. It lost value by 78.7%, much wider than 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.
Recent Divestitures
In Dec 2016, the company signed a definitive agreement to sell two Washington hospitals, 214-bed Yakima Regional Medical & Cardiac Center in Yakima and 63-bed Toppenish Community Hospital in Toppenish, to Sunnyside Community Hospital & Clinics for approximately $45 million including working capital. Earlier in the same month, the company completed the sale and leaseback of 10 medical office buildings for $163 million to HCP, Inc. (HCP - Free Report) . Prior to that in November, the company signed a definitive agreement to sell Rockwood Health System and its associated assets to MultiCare Health System for $425 million. In September, the company signed a definitive agreement for the sale of four hospitals and their associated assets to the subsidiaries of Curae Health, Inc.
In April, the company completed the spin-off of Quorum Health Corporation . In February, the company sold Lehigh Regional Medical Center in Lehigh Acres, FL, along with the related outpatient services, to subsidiaries of Prime Healthcare Services, Inc.
Debt Level
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, which will also help it to focus on a more sustainable portfolio of hospitals and networks for long-term growth. The company’s debt level was at $15.1 billion as of Sep 30, 2016.
Along with balance sheet deleveraging, the company has made a deal of operational changes over the past few quarters for better profitability. Some of these changes are realignment of its divisions, appointment of a number of presidents and vice presidents, a newly promoted Chief Operating Officer, consolidation of many back office functions and IT conversions. These initiatives are expected to drive the company’s future growth.
Community Health carries a Zacks Rank #3 (Hold). A better-ranked stock is HCA Holdings Inc. (HCA - Free Report) carrying a Zacks Rank #2 (Buy). The stock witnessed an upward revision in Zacks Consensus Estimate for 2016 over the past 60 days. You can see the complete list of today’s Zacks #1 Rank stocks here.
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Community Health Sells Home Health Unit for Deleveraging
As announced last October, Community Health Systems, Inc. (CYH - Free Report) has sold 80% ownership interest in its Home Health division to the subsidiary of Almost Family for $128 million. The Home Health business accounts for approximately $200 million of Community Health’s annual revenues.
This divesture is part of the company’s effort to generate funds to lower its debt level.
The stock of Community Health gave a lackluster performance last year. It lost value by 78.7%, much wider than 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.
Recent Divestitures
In Dec 2016, the company signed a definitive agreement to sell two Washington hospitals, 214-bed Yakima Regional Medical & Cardiac Center in Yakima and 63-bed Toppenish Community Hospital in Toppenish, to Sunnyside Community Hospital & Clinics for approximately $45 million including working capital. Earlier in the same month, the company completed the sale and leaseback of 10 medical office buildings for $163 million to HCP, Inc. (HCP - Free Report) . Prior to that in November, the company signed a definitive agreement to sell Rockwood Health System and its associated assets to MultiCare Health System for $425 million. In September, the company signed a definitive agreement for the sale of four hospitals and their associated assets to the subsidiaries of Curae Health, Inc.
In April, the company completed the spin-off of Quorum Health Corporation . In February, the company sold Lehigh Regional Medical Center in Lehigh Acres, FL, along with the related outpatient services, to subsidiaries of Prime Healthcare Services, Inc.
Debt Level
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, which will also help it to focus on a more sustainable portfolio of hospitals and networks for long-term growth. The company’s debt level was at $15.1 billion as of Sep 30, 2016.
Along with balance sheet deleveraging, the company has made a deal of operational changes over the past few quarters for better profitability. Some of these changes are realignment of its divisions, appointment of a number of presidents and vice presidents, a newly promoted Chief Operating Officer, consolidation of many back office functions and IT conversions. These initiatives are expected to drive the company’s future growth.
Community Health carries a Zacks Rank #3 (Hold). A better-ranked stock is HCA Holdings Inc. (HCA - Free Report) carrying a Zacks Rank #2 (Buy). The stock witnessed an upward revision in Zacks Consensus Estimate for 2016 over the past 60 days. You can see the complete list of today’s Zacks #1 Rank stocks here.
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2017?
Who wouldn't? As of early December, the 2016 Top 10 produced 5 double-digit winners including oil and natural gas giant Pioneer Natural Resources which racked up a stellar +50% gain. The new list is painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. Be among the very first to see it>>