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Community Health Systems (CYH) Up 40.9% Since Last Earnings Report: Can It Continue?

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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 40.9% 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 its most recent earnings report in order to get a better handle on the important drivers.

Community Health Q1 Earnings & Revenues Top Estimates

Community Health delivered first-quarter 2021 adjusted net income of 36 cents per share, which compares favorably with the Zacks Consensus Estimate of a loss of 17 cents. Notably, the company had reported a net loss of $1.59 per share in the prior-year quarter.

The company’s results gained momentum from reduced costs, partly offset by lower revenues and decline in patient volumes.

Quarterly Operational Update

In the first quarter, net operating revenues dipped 0.4% year over year to $3 billion primarily due to softer admissions. However, the top line outpaced the Zacks Consensus Estimate by 1.4%.

The first quarter saw a decline of 14% and 15.8% in admissions and adjusted admissions, respectively, from the year-ago quarter’s figures.
As of Mar 31, 2021, the number of licensed beds totaled 13,563, which slumped 13.2% from the prior-year quarter.

Community Health’s adjusted EBITDA surged 60.2% year over year to $495 million in the first quarter, courtesy of the company receiving payments via the Public Health and Social Services Emergency Fund (the “PHSSEF”) as well as state and local pandemic relief programs.

Total operating costs and expenses fell 7.8% to $2.7 billion, thanks to decline in salaries and benefits, supplies, lease cost and rent, and depreciation and amortization.

Further, interest expense, net of $231 million slipped 11.8% year over year in the first quarter.

Financial Update

As of Mar 31, 2021, total assets were $15.6 billion, down 2.6% from 2020-end level.

At the end of the first quarter, cash and cash equivalents of $1.3 billion plunged 25.4% from the level as of Dec 31, 2020.

As of Mar 31, 2021, the company had long-term debt of $11.9 billion, which slid 1.6% from 2020-end level.

During the first quarter, net cash provided by operating activities amounted to $101 million, which nearly doubled on a year-over-year basis.

2021 Guidance Updated

The guidance for net operating revenues of the company remained unchanged in the range of $11.7 billion to $12.5 billion in 2021.

This year, adjusted EBITDA is anticipated to be $1.7-$1.8 billion, higher than the previous guidance of $1.6-$1.8 billion.

Diluted net income per share is projected to be between 25 cents and 60 cents in 2021.

However, the guidance for this year’s interest expense, net cash provided by operating activities and capex remain unchanged from the prior outlook.

 

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended upward during the past month. The consensus estimate has shifted -126.67% due to these changes.

VGM Scores

At this time, Community Health Systems has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. However, the stock was allocated a grade of A on the value side, putting it in the top quintile 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 indicates a downward shift. Notably, Community Health Systems has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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