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Why Is Community Health Systems (CYH) Up 33.5% Since Last Earnings Report?

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It has been about a month since the last earnings report for Community Health Systems (CYH - Free Report) . Shares have added about 33.5% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Community Health Systems due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Community Health's Q4 Earnings Surpass, Improve Y/Y

Community Health reported fourth-quarter 2020 adjusted net income of 96 cents per share, beating the Zacks Consensus Estimate of 18 cents by 433.3%. Moreover, the bottom line soared 140% year over year.

The company’s results benefited from lower expenses and solid revenues, partially offset by reduced patient volumes.

Quarterly Operational Update

In the fourth quarter, net operating revenues were $3.1 billion, trumping the Zacks Consensus Estimate by 1.3%. However, the top line dipped 5.1% year over year due to weak admissions.

The fourth quarter witnessed a decrease of 12.9% and 17.8% in admissions and adjusted admissions each from the respective year-ago numbers.
As of Dec 31, 2020, the number of licensed beds came in at 14110, down 13.1% from the prior-year quarter.

For the fourth quarter, the company delivered total adjusted EBITDA of $614 million, up 37.4% year over year.

Total operating costs and expenses of $2.7 billion were down 14% year over year owing to lower salaries and benefits, other operating expenses, depreciation and amortization. Also, interest expenses of $252 million slid 2.7% in the fourth quarter.

Financial Update

Total assets at fourth-quarter end were $16 billion, which inched up 2.5% from the level at 2019 end.

Cash and cash equivalents of $1.7 billion compared favorably with $216 million at 2019 end.

At the end of the fourth quarter, net cash provided by operating activities was $2.1 billion compared with net cash provided by operating activities of $385 million in the same period of 2019.

The company has a long-term debt of $12 billion as of Dec 31, 2020, down 9.7% from the level as of Dec 31, 2019.

2021 Guidance

Net operating revenues are expected in the range of $11.7-$12.5 billion.
Adjusted EBITDA is estimated in the band of $1.6-$1.8 billion. Interest expense is anticipated between $895 million and $905 million.
Net cash provided by operating activities is expected between $200 and $300 million. Capex is expected between $400 to $500 million.

Full-Year Update

For 2020, revenues came at $11.8 billion, down 10.8% from the 2019 level. Net income attributable to the company came in at $4.39 against net loss of $5.93 per share in 2019. Adjusted EBITDA for 2020 was $1.8 billion, up 11.1% year over year.

 

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month. The consensus estimate has shifted 70% due to these changes.

VGM Scores

At this time, Community Health Systems has a great Growth Score of A, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Community Health Systems has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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