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Analyst Blog

Franklin, TN-based Community Health (CYH - Free Report) reported adjusted loss of 35 cents per share in the third quarter of 2016, in line with the Zacks Consensus Estimate. However, the figure deteriorated a massive 162.5% from the year-ago quarter on revenue decline as well as higher operating expenses.

Net operating revenues decreased 9.6% to almost $4.38 billion, which, however, beat the Zacks Consensus Estimate of $4.27 billion. Notably, operating and financial performance in the third quarter was below expectations due to lower-than-expected volumes.

Meanwhile, a glimpse at recent market sentiments for the company reveals a dismal trend. Notably, Community Health represents a negative one-year return of 79.3%, way wider than 0.54% for the S&P 500 over the same time frame.

Quarter Highlights

Per management, Community Health registered an unsatisfactory EBITDA margin of $10.6 million in the third quarter. However, continued focus on operational enhancement and portfolio rationalization should yield positive results over the long haul.

Coming to the divestiture plans of the company, Community Health has been working on seven transactions that include 17 hospitals, homecare and non-hospital real estate. Notably, these assets are worth $2 billion in annual revenues and account for mid-single digit EBITDA margins.

COMMNTY HLTH SY Price, Consensus and EPS Surprise

 

COMMNTY HLTH SY Price, Consensus and EPS Surprise | COMMNTY HLTH SY Quote

The company had $10 million lower revenues due to Medicaid reimbursement reductions primarily in Texas on payer mix and volume improvement.

Quarter Details

Total admissions decreased 12.4% while adjusted admissions declined 13%.

On a same-store basis, net revenues surged 1.2%, courtesy of a 2.8% increase in net revenue per adjusted admission and 1.5% decrease in volume or adjusted admissions.

Balance Sheet

At the end of the third quarter, Community Health had approximately $15.1 billion of long-term debt. Notably, this shows a decline from $16.6 billion since the beginning of the year.

Guidance

For full-year 2016, net operating revenues without the provision for bad debts are forecasted in the band of $18,300 million to $18,500 million. Adjusted EBITDA is expected between $2,200 million and $2,275 million. Adjusted earnings per share are projected in the range of 30–50 cents.

Zacks Rank & Key Picks

Community Health carries a Zacks Rank #5 (Strong Sell).

Better-ranked stocks in the broader medical space include Cardiovascular Systems Inc. (CSII - Free Report) , Exelixis, Inc. (EXEL - Free Report) and IDEXX Laboratories, Inc. (IDXX - Free Report) . Notably, all the companies sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here

Cardiovascular Systems represents a stellar one-year return of 55.1%. Notably, the company has an expected long-term growth rate of 22.5%.

Exelis has a stupendous one-year return of 66.1%. In the last reported quarter, the company registered an impressive earnings surprise of 40.74%.

IDEXX Laboratories represents a promising one-year return of 48.6%. The company has a long-term expected growth rate of almost 14.8%.

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