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Why Is Community Health Systems (CYH) Down 18.9% Since Last Earnings Report?

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A month has gone by since the last earnings report for Community Health Systems (CYH - Free Report) . Shares have lost about 18.9% 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 catalysts.

Community Health Incurs Loss in Q3, Revenues Down Y/Y

Community Health incurred adjusted loss of 29 cents per share in third-quarter 2019, narrower than the Zacks Consensus Estimate of a loss of 55 cents. The bottom line also improved from the year-ago quarterly loss of $1.64. The bottom-line result was mainly due to lower admissions in the quarter under review.

Quarterly Operational Update

In the third quarter, net operating revenues were $3.2 billion, surpassing the Zacks Consensus Estimate by 2.9%. However, the top line declined 5.9% year over year due to reduced admissions.

The third quarter witnessed a 9.2% decrease in admissions and an 8.4% fall in adjusted admissions from the respective year-ago figures.

Total operating costs and expenses were $3 billion, down 9.3% year over year owing to lower salaries and benefits plus minimal supplies as well as operating expenses.

Financial Update

Total assets at third-quarter end were $15.9 billion, up 0.2% from the level at 2018 end.

Cash and cash equivalents were down 19.9% from the level as of 2018 end.

In the third quarter, net cash used in operating activities was $74 million compared with net cash provided by operating activities of $346 million a year ago.

The company has a long-term debt of $13.3 billion as of Sep 30, 2019, down 0.8% from the level as of Dec 31, 2018.

2019 Guidance

Loss per share from continuing operations is now estimated between $1.75 and $1.85 while revenues are projected between $12.9 billion and $13.2 billion. Adjusted EBITDA is predicted in the range of $1.6-$1.65 billion while same store hospital annual adjusted admissions growth is likely to inch up 1.5-2.5%.

Capital expenditure is expected between $425 and $475 million whereas net cash provided by operating activities is projected between $500 and $550 million.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month. The consensus estimate has shifted -90.68% due to these changes.

VGM Scores

At this time, Community Health Systems has an average Growth Score of C, however its Momentum Score is doing a lot better with an A. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% 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 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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