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Vanguard Back to Profit in 4Q

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Vanguard Health Systems, Inc. reported earnings per share of 24 cents in the fourth quarter of fiscal 2012, way above the Zacks Consensus Estimate of 13 cents and reversing last year's loss of 22 cents.

EPS for fiscal 2012 came in at 72 cents compared to a loss of 13 cents in the previous fiscal year.

During the quarter, revenues increased 3.8% year over year to $1454.8 million with $1288 million from net Patient service revenues and the rest from Premium revenues.

Revenues for fiscal 2012 increased 29.8% to $5949 million.

The company reported $20.2 million as income from continuing operations before income taxes, compared with a loss of $12.6 million in the year-ago quarter, which recorded $27.6 million as monitoring fees and expenses.

The company exited the fiscal year with cash of $455.5 million and total debt of $2,706.6 million. Earlier this year, Vanguard Health issued $375.0 million of 7.750% Senior Notes due 2019. Cash flows from operating activities were $113.6 million.

For fiscal 2013, Vanguard Health expects to report adjusted EBITDA between $550 million and $575 million with EPS of 74 cents to 93 cents.

Several headwinds impacted Vanguard’s revenues during the fiscal year, such as lower demand for elective services due primarily to the weak economy and a shift to patients who are uninsured or covered by lower paying Medicaid plans. These challenges are not expected to subside in the near future. Moreover, the company was adversely affected by a cut in reimbursement rates by several states.

Vanguard Health, with 28 hospitals at the end of the fiscal 2012, has grown through both the organic and inorganic routes, the latest being the acquisition of Valley Baptist Health System in September 2011 for $200.5 million in cash and assumption of certain debt. This deal brought 866 licensed beds located in Harlingen and Brownsville, Texas.

This was preceded by the acquisition of the Detroit Medical Center (other than donor-restricted assets and certain other assets) in January 2011. This provided Vanguard with eight acute care and specialty hospitals and related healthcare facilities in Detroit.

The stock carries a Zacks #3 Rank (Hold) in the short term.

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