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Community Health Systems (CYH) Down 30.5% Since Last Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for Community Health Systems (CYH - Free Report) . Shares have lost about 30.5% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Community Health Systems due for a breakout? 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 Q4 Earnings Beat on Strong Admissions

Community Health Systems reported fourth-quarter 2022 adjusted net earnings of $1.50 per share, which surpassed the Zacks Consensus Estimate of 41 cents per share. Additionally, the bottom line climbed 30.4% year over year.

Net operating revenues slid 2.8% year over year to $3,142 million in the quarter under review. Also, the top line fell shy of the consensus mark of $3,170 million and our estimate of $3,142.5 million.

The quarterly results benefited on the back of improved admissions and adjusted admissions. An increase in the count of surgeries also contributed to the quarterly results. However, the upside was partly offset by an elevated expense level.

Quarterly Operational Update

At the fourth-quarter end, the hospital count for Community Health stood at 80, which lagged both the Zacks Consensus Estimate and our estimate of 81.

Patient days tumbled 7.5% year over year. The average length of stay fell 9.8% year over year, while the occupancy rate of 50% deteriorated 150 basis points year over year.

Admissions grew 1.9% year over year. Meanwhile, adjusted admissions advanced 5.2% year over year in the quarter under review. On a same-store basis, admissions and adjusted admissions improved 4.4% and 8.2%, respectively, from their corresponding prior-year quarter’s reported figures.

Licensed beds of CYH totaled 12,832 as of Dec 31, 2022, which indicates a decrease of 457 beds from the 2021-end level. The reported figure missed both the consensus mark and our estimate of 13,333.

Total operating costs and expenses increased 3.7% year over year to $2,914 million in the fourth quarter, lower than our estimate of $2,968.7 million. The increase was mainly due to higher salaries and benefits and other operating expenses. Meanwhile, net interest expenses of $205 million declined 6.8% year over year.

Community Health reported a net income of $446 million, which doubled year over year. Adjusted EBITDA dropped 25.2% year over year to $404 million in the quarter under review primarily due to reduced acuity of inpatient admissions, unfavorable changes in payor mix and lower pandemic relief funds recognized.

Financial Update (as of Dec 31, 2022)

Community Health exited the fourth quarter with cash and cash equivalents of $118 million, which declined more than four-fold from the figure in 2021 end. Total assets of $14,669 million fell 3.6% from the 2021-end level.

Long-term debt amounted to $11,614 million, which decreased 4.1% from the figure as of Dec 31, 2021. Current maturities of long-term debt came in at $21 million.

During 2022, CYH generated operating cash flows of $300 million. Net cash used in operating activities came in at $131 million in 2021.

2023 View

Net operating revenues are anticipated to lie between $12,200 million and $12,600 million this year, the mid-point of which indicates a rise of 1.5% from the 2022 reported figure of $12,211 million.

Adjusted EBITDA is estimated to lie within $1,475-$1,625 million. The mid-point of the guidance implies a 5.7% rise from the 2022 figure of $1,466 million.

Net loss per share is forecasted to lie between 65 cents and 5 cents in 2023. Community Health reported a net loss of $1.38 per share in 2022.

Depreciation and amortization are predicted within $510-$530 million. Net interest expense is estimated to lie in the $815-$835 million band.

Net cash provided by operating activities is anticipated between $675 million and $825 million in 2023. Capital expenditures are expected within $450-$500 million. Diluted weighted-average shares outstanding is estimated within 130-131 million.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review.

The consensus estimate has shifted -42.08% due to these changes.

VGM Scores

Currently, Community Health Systems has a subpar Growth Score of D, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

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


Estimates have been broadly trending downward 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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