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Acadia Healthcare's (ACHC) Solid Results Lead to Stock Rally
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Shares of Acadia Healthcare Company, Inc. (ACHC - Free Report) rallied after the company announced strong numbers for patient volumes, driving home the fact that the pandemic-triggered business disruption is over. Its long-term growth strategy and raised guidance also led to this optimism.
The stock rose 3% in the last trading session following the company’s solid second-quarter 2021 result release wherein both earnings and revenues surpassed estimates by 12.7% and 3.8%, respectively. The company, which provides treatment related to behavioral health and substance use, continued with its beat streak for the seventh consecutive quarter. Revenues gained from an increase in patient day and revenue per patient day.
Investors grew bullish on the stock, as solid volume trends showed up and patient admission grew 6.9% in the first half of this year. This reflected a rebound from last-year’s lukewarm scenario when admissions were down 0.6%.
Similar trend was seen across other hospital companies, namely HCA Healthcare, Inc. (HCA - Free Report) , Community Health Systems, Inc. (CYH - Free Report) and Universal Health Services, Inc. (UHS - Free Report) with higher admissions that helped the same post better-than-expected results
Bright Guidance
Upbeat guidance for the full year was another positive. Revenues are now estimated between $2.28 billion and $2.32 billion for 2021, up from the prior guidance of $2.24-$2.29 billion. Adjusted EBITDA is projected to be $530-$550 million, higher from the previous outlook of $500-$530 million. Adjusted earnings per share are forecast within $2.50-$2.70, up from the earlier view of $2.30-$2.55. Operating cash flows are expected to be $275-$310 million for this year.
The updated revenues guidance points to a growth of 10%. This top line growth is very solid compared with 3.9% and 5.8% achieved in 2020 and 2019, respectively. Acadia Healthcare’s growth strategy which includes network expansion through addition of beds, putting up wholly owned de novo facilities by strategic joint ventures and acquisitions, bodes well.
Acadia Healthcare’s Strong Multi-Pronged Strategy
Acadia Healthcare is committed to facility expansion by addition of beds and launching hospitals. It expects to add approximately 300 beds this year to meet growing demand. The company is looking to tap the underserved markets, which can generate high returns.
Acadia Healthcare is also opening Comprehensive Treatment Centres (CTC) to address the rising incidence of drug overdose deaths, which increased nearly 30% in 2020 as a result of social isolation, trauma and job losses stemming from the pandemic and the spread of fentanyl mixed in illicit drugs. In the first six months of 2021, 3 CTCs were opened and eight more will be unveiled in the second half of this year. The company plans to launch six to 10 CTCs each year from 2022 to 2025.
Pandemic-Widened Opportunity
Capacity expansion will serve the company well, which is one of the leading behavioral healthcare providers. Acadia Healthcare is exposed to a growing market of mental health issues and substance use disorders as more people suffered stress and anxiety due to the pandemic.
Kaiser study in March 2021 found that about half of adults continue to report negative mental health impacts related to worry or stress emerging from the pandemic, echoing almost the same percentage that was recorded at the height of the pandemic in July 2020.
Investors made a note of this business opportunity, which pushed up the company’s share price by 299% since March 2020 until the end of last year. So far this year, the stock has gained 24.5% compared with its industry’s growth of 44.6%. It has enough fuel to rise further on the back of many compelling factors working in its favor.
Image: Bigstock
Acadia Healthcare's (ACHC) Solid Results Lead to Stock Rally
Shares of Acadia Healthcare Company, Inc. (ACHC - Free Report) rallied after the company announced strong numbers for patient volumes, driving home the fact that the pandemic-triggered business disruption is over. Its long-term growth strategy and raised guidance also led to this optimism.
The stock rose 3% in the last trading session following the company’s solid second-quarter 2021 result release wherein both earnings and revenues surpassed estimates by 12.7% and 3.8%, respectively. The company, which provides treatment related to behavioral health and substance use, continued with its beat streak for the seventh consecutive quarter. Revenues gained from an increase in patient day and revenue per patient day.
Investors grew bullish on the stock, as solid volume trends showed up and patient admission grew 6.9% in the first half of this year. This reflected a rebound from last-year’s lukewarm scenario when admissions were down 0.6%.
Similar trend was seen across other hospital companies, namely HCA Healthcare, Inc. (HCA - Free Report) , Community Health Systems, Inc. (CYH - Free Report) and Universal Health Services, Inc. (UHS - Free Report) with higher admissions that helped the same post better-than-expected results
Bright Guidance
Upbeat guidance for the full year was another positive. Revenues are now estimated between $2.28 billion and $2.32 billion for 2021, up from the prior guidance of $2.24-$2.29 billion. Adjusted EBITDA is projected to be $530-$550 million, higher from the previous outlook of $500-$530 million. Adjusted earnings per share are forecast within $2.50-$2.70, up from the earlier view of $2.30-$2.55. Operating cash flows are expected to be $275-$310 million for this year.
The updated revenues guidance points to a growth of 10%. This top line growth is very solid compared with 3.9% and 5.8% achieved in 2020 and 2019, respectively. Acadia Healthcare’s growth strategy which includes network expansion through addition of beds, putting up wholly owned de novo facilities by strategic joint ventures and acquisitions, bodes well.
Acadia Healthcare’s Strong Multi-Pronged Strategy
Acadia Healthcare is committed to facility expansion by addition of beds and launching hospitals. It expects to add approximately 300 beds this year to meet growing demand. The company is looking to tap the underserved markets, which can generate high returns.
Acadia Healthcare is also opening Comprehensive Treatment Centres (CTC) to address the rising incidence of drug overdose deaths, which increased nearly 30% in 2020 as a result of social isolation, trauma and job losses stemming from the pandemic and the spread of fentanyl mixed in illicit drugs. In the first six months of 2021, 3 CTCs were opened and eight more will be unveiled in the second half of this year. The company plans to launch six to 10 CTCs each year from 2022 to 2025.
Pandemic-Widened Opportunity
Capacity expansion will serve the company well, which is one of the leading behavioral healthcare providers. Acadia Healthcare is exposed to a growing market of mental health issues and substance use disorders as more people suffered stress and anxiety due to the pandemic.
Kaiser study in March 2021 found that about half of adults continue to report negative mental health impacts related to worry or stress emerging from the pandemic, echoing almost the same percentage that was recorded at the height of the pandemic in July 2020.
Investors made a note of this business opportunity, which pushed up the company’s share price by 299% since March 2020 until the end of last year.
So far this year, the stock has gained 24.5% compared with its industry’s growth of 44.6%. It has enough fuel to rise further on the back of many compelling factors working in its favor.
Image Source: Zacks Investment Research
Acadia Healthcare currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.