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Acadia Healthcare Cuts 2025 Outlook After Liability Bomb Went Off
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Key Takeaways
Acadia slashed its 2025 guidance after its actuarial review revealed sharply higher litigation costs.
ACHC cites soaring claim frequency, bigger settlements and weaker reinsurance as key cost drivers.
ACHC now expects 2025 PLGL expense of about $116 million, more than double the prior year's level.
Acadia Healthcare Company, Inc. (ACHC - Free Report) recently warned investors that its liability costs are rising far faster than expected. After completing its annual actuarial review, the company determined that patient-related litigation will be significantly more expensive in 2025. Because of this, Acadia is cutting its 2025 guidance: adjusted EBITDA drops by $49 million, and EPS is lowered by 41 cents.
Management had already anticipated pressure, but the final actuarial findings showed a much larger hit. The bulk of the increase stems from a surge in claims, higher settlement expectations and less favorable reinsurance protection, all of which sharply push up liability reserves.
Acadia now expects 2025 professional and general liability (PLGL) expense of about $116 million, more than double 2024’s $54 million. For 2026, PLGL costs are still expected to remain elevated at $100–$110 million. Claim frequency is the biggest driver, spiking 168% for the 2025 policy year. Adjusted EBITDA for 2025 is now expected to be within $601-$611 million, while adjusted earnings are expected in the $1.94-$2.04 per share range, declining from $3.30 in 2024.
The 2025 guided range for earnings is significantly below the Zacks Consensus Estimate of $2.34 per share. It has witnessed five downward estimate revisions in the past month against no movement in the opposite direction.
Image Source: Zacks Investment Research
Sharp increases in liability costs directly erode Acadia’s profitability and signal escalating legal and operational risks. The guidance cuts also challenge investor confidence, suggesting margin pressure may persist beyond 2025. Shares have underperformed peers and the industry this year amid continued media scrutiny and questions from investors, including Engine Capital, over management discipline.
Image Source: Zacks Investment Research
How Are ACHC’s Peers Faring?
Hospital operators like Tenet Healthcare Corporation (THC - Free Report) and HCA Healthcare, Inc. (HCA - Free Report) are benefiting from rising demand due to the growing senior population and cases of diseases.
Tenet Healthcare is riding on growing patient revenue per adjusted admissions. It has been steadily gaining from USPI's performance and tuck-in acquisitions. THC also doesn't shy away from divesting its non-core and unprofitable business units. Meanwhile, HCA Healthcare banks on increasing admissions, an extensive healthcare services suite and a widespread treatment network across the country. Buyouts help it boost its portfolio and penetrate further into different geographies.
Acadia’s Valuation & Zacks Rank
ACHC is currently trading at a forward P/E of 7.33X, a steep discount to both its five-year median of 20.55X and the industry average of 11.69X.
Image Source: Zacks Investment Research
The stock currently has a Zacks Rank #5 (Strong Sell).
Image: Bigstock
Acadia Healthcare Cuts 2025 Outlook After Liability Bomb Went Off
Key Takeaways
Acadia Healthcare Company, Inc. (ACHC - Free Report) recently warned investors that its liability costs are rising far faster than expected. After completing its annual actuarial review, the company determined that patient-related litigation will be significantly more expensive in 2025. Because of this, Acadia is cutting its 2025 guidance: adjusted EBITDA drops by $49 million, and EPS is lowered by 41 cents.
Management had already anticipated pressure, but the final actuarial findings showed a much larger hit. The bulk of the increase stems from a surge in claims, higher settlement expectations and less favorable reinsurance protection, all of which sharply push up liability reserves.
Acadia now expects 2025 professional and general liability (PLGL) expense of about $116 million, more than double 2024’s $54 million. For 2026, PLGL costs are still expected to remain elevated at $100–$110 million. Claim frequency is the biggest driver, spiking 168% for the 2025 policy year. Adjusted EBITDA for 2025 is now expected to be within $601-$611 million, while adjusted earnings are expected in the $1.94-$2.04 per share range, declining from $3.30 in 2024.
The 2025 guided range for earnings is significantly below the Zacks Consensus Estimate of $2.34 per share. It has witnessed five downward estimate revisions in the past month against no movement in the opposite direction.
Sharp increases in liability costs directly erode Acadia’s profitability and signal escalating legal and operational risks. The guidance cuts also challenge investor confidence, suggesting margin pressure may persist beyond 2025. Shares have underperformed peers and the industry this year amid continued media scrutiny and questions from investors, including Engine Capital, over management discipline.
How Are ACHC’s Peers Faring?
Hospital operators like Tenet Healthcare Corporation (THC - Free Report) and HCA Healthcare, Inc. (HCA - Free Report) are benefiting from rising demand due to the growing senior population and cases of diseases.
Tenet Healthcare is riding on growing patient revenue per adjusted admissions. It has been steadily gaining from USPI's performance and tuck-in acquisitions. THC also doesn't shy away from divesting its non-core and unprofitable business units. Meanwhile, HCA Healthcare banks on increasing admissions, an extensive healthcare services suite and a widespread treatment network across the country. Buyouts help it boost its portfolio and penetrate further into different geographies.
Acadia’s Valuation & Zacks Rank
ACHC is currently trading at a forward P/E of 7.33X, a steep discount to both its five-year median of 20.55X and the industry average of 11.69X.
The stock currently has a Zacks Rank #5 (Strong Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.